Capital One now says it will begin reporting their cardholders’ credit limits to the three credit bureaus. It has been a long-standing practice of theirs to only report the cardholder’s current debt, but not their limit. This practice has very likely harmed the cardholder’s credit score. Approximately 30% of your credit score is based on your utilization of credit. If you are near your credit limit, your score goes down, while low balances benefit your score. Ideally your balance would be below 30% of your limit on each card.
The problem with Capital One’s practice is that with no limit reported, the bureaus were forced to either ignore utilization on the account or use your highest balance as your limit. Let’s use an example of a card with a $10,000 limit, and you typically carry a balance of around $900. If the most you’ve ever charged was $1,000, your utilization would show as 90% rather than the real utilization of 9%. Your score would go down even though in reality you are managing your debt well. Lower scores translate into higher mortgage rates, which then translates into higher monthly payments. Once Capital One begins reporting credit limits, cardholders will hopefully see their credit scores go up in the few months.