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Personal Finances / Credit Cards and Consumer Debt
|Subject: Re: capital one and credit reporting||Date: 6/14/2007 10:14 AM|
|Author: AcmeFool||Number: 254413 of 311074|
which means that other companies that might want to offer you a credit card don't have any idea how much unused credit you might have.
I think you know all of this, but it is important to correct/clarify what you have written...
It is not the fact that you might have a lot of unused credit that creates the problem. It is the fact that the FICO score most lenders use in determining whether or not to approve your application uses credit-utilization ratios in the calculation. Since there is no reported credit limit for the account, all they can use is the high-balance in the last 12 (or 24?) months as your credit limit for the account.
This would be all well and good except that most people tend to be relatively consistent during the year. Sure, they spend more in December and such, but the gap is not enormous. So they end up with a constant credit utilization ratio of 50% or more (sometimes much more). And this hacks their credit score substantially.
IMO, all issuers should be forced to report credit limits. Fair Isaac is taking steps to counter people that are gaming the system to artificially inflate their FICO scores. Why do they stand by and allow banks to artificially decrease them?
Obviously it is because their bread is buttered by the banks. I am normally a hands-off person when it comes to the government and business. This is one of a few notable exceptions.
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