Creditors Who Want to Keep Your Score Down
Credit omission can be seriously detrimental to your credit score, especially if you have low or borderline credit. The top way to improve your credit is to pay your bills on time, but this only holds true if your creditors report this to the credit reporting agencies, which they are not required by law to do.
Why would your creditors want to keep your score down?
If you’re in the bad or borderline credit category, you’re probably paying a significantly higher interest rate, meaning they’re making some good money off of you. If your creditor reports your good payment habits to the credit reporting agencies, your credit score will increase and you’ll start getting better offers in the mail. If you’re paying 15.99% on a credit card and suddenly get an offer in the mail for 7.99% to switch, why would you want to keep paying the higher rate? You wouldn’t, so hopefully you’d switch and save yourself some money. If your score doesn’t increase because, according to the credit reporting agencies, your credit and payment history don’t improve, you might not ever get those 7.99% credit offers in the mail because no one knows of your efforts.
Does this only affect people with bad or borderline credit?
This affects everyone. According to CreditBloggers, Capital One is not reporting your credit limit to the credit reporting agencies. Because as much as 30% of your credit score is based on your available credit to used credit ratio, credit reporting agencies not knowing the upper limit on your account can negatively affect your score, especially if you have a higher limit.
When lacking a credit limit, many scoring systems substitute your highest balance as your credit limit, possibly putting you in at 100% usage on that credit card if you’re current utilization is your high balance and increasing the perceived amount of money you owe. As explained in the book Credit Scores and Credit Reports by Evan Hendricks, one consumer discovered that he could improve his credit score by maxing out his Capital One card and paying it off immediately simply to increase the highest balance ever used which is often used as the assumed credit limit. A very informative chapter of this book can be found here. (Note: this book is going on my To Read list.)
So now what do you do?
Take a look at your credit reports and find out which creditors of yours are holding out. Call them up and ask them to report your credit limit to the credit reporting agencies. If they don’t, threaten to take your business elsewhere. If they still don’t give, then you have to follow through on your threat, if possible.
According to the Evan Hendricks book, MBNA, Chase, Bank One, First USA, Providian and Sears are much better about reporting your credit history and limits to the credit reporting agencies. (Note: MBNA is now part of Bank of America, Bank One and First USA are now Chase and Sears is now Citibank. Providian is still Providian, as far as I know. ) Hopefully, even after mergers and buyouts, these creditors will still keep up with the good reporting.
If too many lenders get the idea that they can keep you as a customer simply by not reporting your good habits to the credit reporting agencies, more will follow this example and before you know it, your hard work will no longer reward you with the good credit and credit offers you deserve.
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March 21st, 2006 at 9:05 am
Interesting. I didn’t bother to challenge the issue with my Capital One balance because my balance will be paid off (Yay!) on 3/31 and the highest balance is actually $10 more than what my limit is (they gave me a temporary limit increase of $10 for the balance transfer when I got the card). I still have access to the report I pulled from Experian in January due to disputes, so I’ll run through and make sure I get the full credit limits added to all the cards reporting them low though and make sure I due them on subsequent report pulls. I’m pulling Transunion next, following the pull one report every 4 months rule to keep my credit records in check throughout the year. Starting September, I get to do it every 2 months thanks to Massachusetts state law!
By the way, Providian is now Washington Mutual. If you can get a Providian card, it has the extra advantage of reporting your credit score to you online for free. You just need to sign up on their site with your card.
Great tip!
March 21st, 2006 at 10:45 am
I’ve never disputed a missing limit so if you have luck with it, I’d be interested to hear about it. I didn’t even notice Capital One missing that limit until I saw it on CreditBloggers, then I went back and looked. That’s the only one that I saw missing on my credit report.
Someone I know mentioned previously that their mortgage company wasn’t updating their credit report to reflect their on time payments and she had a problem later with it, I think with refinancing the loan. It was a high-interest mortgage so I’m sure they were trying to keep her as long as possible.
You really should read that chapter from the book I linked to in the post. It’s fascinating stuff. I bet you’ll really find it interesting.
March 25th, 2006 at 7:55 am
I challenged both Filene’s and Lord & Taylor’s retail account for not reporting the limit. Those were the only ones other than closed accounts and Capital One, which I won’t challenge because the highest balance is $10 more than my limit and I’m not sure if that will negatively affect my score, even though it was a temporary raise for the first finance charge on the account before the payment went through.
April 11th, 2006 at 10:17 am
Filene’s added my limit. L&T is still out for dispute.
April 11th, 2006 at 2:24 pm
[...] Coincidentally, in January I did one of my two annual credit report pulls from Experian. I can pull twice a year as a Massachusetts resident, but messed up in September and pulled all three at once, so I’m limited to one per agency until September. In May, I’ll pull Transunion’s report. Experian had several errors on my report. I can dispute most of them online, but I had to write a letter about my name being wrong and indicating my correct current employer (they still listed IBM). This got me another report. Since reports can be accessed online for 90 days, I can access this particular report until late May. I’ve been checking it for new information sporadically, as it doesn’t really change often. After Liz’s article on creditors failing to report your actual limit and only reporting your high balance, I challenged a couple more. One of those disputes was resolved yesterday and I received an email to go check today, prompting me to take another peek at my report. [...]