If I prepay for say $1000, will my credit limit be the $1000?

Answer 1

No, I don't think it works that way.  If you have a credit limit of $500 in this scenario then your credit limit would still be $500.  That is all that the lender is willing to extend you, until you prove that you can handle it.  If you start using your credit card like a checking account they will most likely just re-reimburse you the overpayment.  They are in the business of credit don't forget.