Is Capital One Finally Doing the Right Thing?
by John Ulzheimer for Credit.com
In early August, Capital One announced a major change to their credit reporting practices. According to Tatiana Stead, a spokesperson for the company, “Capital One made a decision to start reporting credit limits to the bureaus. We are in the process of implementing.” Here’s what they shared with Credit.com:
Hey John,
Heard you had a question about our reporting lines...
Just to confirm, Capital One made a decision to start reporting credit limits to the bureaus. We are in the process of implementing.
Like any policy that our customers may have concerns about, we constantly reevaluate our practices and made the decision to report credit limits some time ago.
Best,
Tatiana
This is a significant policy change. For many years, Capital One has reported their customers’ highest balance to the credit bureaus, rather than their legitimate credit limit. Consumer groups have been very critical of Capital One for their reporting practices because of the damage that it has done to millions of their cardholder’s credit scores.
By reporting an amount that is lower than the credit limit, which a highest balance often is, you artificially increase the cardholder’s “revolving utilization” and it makes the consumer look more maxed out than they really are.
What Does This Mean to Capital One Cardholders?
Capital One has been very tight lipped about the change except for what you see above. However, assuming that they are going to report the legitimate credit limit to all three credit reporting agencies then their customers should see the following…
1. If your Capital One credit limit is significantly higher than your highest balance on the account your score could increase, significantly in many cases.
Example: If you have a $10,000 credit limit and have never had a balance on your statement any higher than $1,000 then your use of that card has never been higher than 10%, which is normally great for your credit scores. However, up until this change, your credit limit was misinterpreted as $1,000 and even a modest balance of $800 made you look highly maxed…80% in this example, which is bad for your scores.
2. If your Capital One credit limit is not significantly higher than your highest balance then your scores will not increase much, if at all.
Example: If you have a $2,000 credit limit and have maxed out your card in the past then your credit limit was already being interpreted at $2,000 because it was your highest balance. As such, this change won’t have any impact on your scores.
3. If you are an authorized user on a Capital One credit card with a high credit limit and a low balance then you could see your FICO® scores increase, but only temporarily. Please read our previous alert for a more thorough explanation of the authorized user treatment and how it will be changing.
4. If you do not have a Capital One credit card then this change will not impact your credit files or credit scores in any way.
In early August, Capital One announced a major change to their credit reporting practices. According to Tatiana Stead, a spokesperson for the company, “Capital One made a decision to start reporting credit limits to the bureaus. We are in the process of implementing.” Here’s what they shared with Credit.com:
Hey John,
Heard you had a question about our reporting lines...
Just to confirm, Capital One made a decision to start reporting credit limits to the bureaus. We are in the process of implementing.
Like any policy that our customers may have concerns about, we constantly reevaluate our practices and made the decision to report credit limits some time ago.
Best,
Tatiana
This is a significant policy change. For many years, Capital One has reported their customers’ highest balance to the credit bureaus, rather than their legitimate credit limit. Consumer groups have been very critical of Capital One for their reporting practices because of the damage that it has done to millions of their cardholder’s credit scores.
By reporting an amount that is lower than the credit limit, which a highest balance often is, you artificially increase the cardholder’s “revolving utilization” and it makes the consumer look more maxed out than they really are.
What Does This Mean to Capital One Cardholders?
Capital One has been very tight lipped about the change except for what you see above. However, assuming that they are going to report the legitimate credit limit to all three credit reporting agencies then their customers should see the following…
1. If your Capital One credit limit is significantly higher than your highest balance on the account your score could increase, significantly in many cases.
Example: If you have a $10,000 credit limit and have never had a balance on your statement any higher than $1,000 then your use of that card has never been higher than 10%, which is normally great for your credit scores. However, up until this change, your credit limit was misinterpreted as $1,000 and even a modest balance of $800 made you look highly maxed…80% in this example, which is bad for your scores.
2. If your Capital One credit limit is not significantly higher than your highest balance then your scores will not increase much, if at all.
Example: If you have a $2,000 credit limit and have maxed out your card in the past then your credit limit was already being interpreted at $2,000 because it was your highest balance. As such, this change won’t have any impact on your scores.
3. If you are an authorized user on a Capital One credit card with a high credit limit and a low balance then you could see your FICO® scores increase, but only temporarily. Please read our previous alert for a more thorough explanation of the authorized user treatment and how it will be changing.
4. If you do not have a Capital One credit card then this change will not impact your credit files or credit scores in any way.
