The potential for
fraud, identity theft and
other criminal attacks on
your personal information is
more than enough to keep you
busy making certain your
personal information is
secure and accurate. But
there's more. A common
credit industry information
reporting and gathering
policy requires additional
effort on your part to make
sure the credit you've
earned is the credit you
get. Three recent federal
class action suits filed in
the Greenville, SC, U.S.
District Court say the three
major credit bureaus --
Equifax, Experian and
TransUnion -- allow some
credit card issuers to
engage in a practice with
potentially negative
consequences for consumers'
credit scores. The suits say
that's a violation of
federal law. The suits say
the credit bureaus allow
credit card companies (among
them, Capital One, which is
not named in the suit) to
withhold reporting your
credit card account's credit
limit to the credit bureaus.
Generally, your credit limit
can contribute to lowering
your score, if you've just
about tapped it out. It can
also raise your score, if
you've judiciously used a
smaller portion of it.
If the bloodless
computerized scoring system
doesn't know your credit
limit, it could effectively
assign one and lower your
score. With lower scores
come higher credit costs,
pushing up the interest
rates on mortgages, personal
loans, car loans, credit
cards and other credit.
What's in your wallet
could be a lot less than
there should and it's not
just credit card companies
that give you a credit
limit. Credit card services
like American Express, that
issue credit with no credit
limits, generate similar
data that could scramble
your credit score, experts
say. Credit card experts say
the practice of not
reporting credit limits when
they exist discourages
competitors from siphoning
away customers, either
because they can't get a
real bead on a given
consumer's credit card use
or because cardholders with
lower apparent scores are
less desirable.
The suit says under
the Fair Credit Reporting
Act, the national bureaus
must follow "reasonable
procedures to assume maximum
possible accuracy of
information in consumer
(credit) reports."
However, because
credit bureaus apparently
haven't always approached
data collecting in the
manner prescribed by law,
three years ago, the Fair
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Accurate Credit Transactions
Act (FACT Act) amended the
FCRA, in part, specifically
to identify patterns,
practices, and specific
forms of activity that can
compromise the accuracy and
integrity of information
furnished to consumer
reporting agencies.
With the class action
suit and the FACT Act
provision recently out of
the public hearing stage,
consumers can expect change,
but only after some time,
hoping the practices are
corrected to protect
consumers, rather than the
credit industry's coiffeurs.
That doesn't mean there's
nothing you can do to get
the credit you are due.
Get your free credit
report from the only FACT
Act-sanctioned service
AnnualCreditReport.com. You
can actually get three free
each year, one from each of
the three credit reporting
agencies. Check your report
for companies that don't
report your credit limit and
other questionable
information. You may have to
pay a small fee for your
credit score, but you'll
need it to check back later
to determine if your efforts
have improved it.
Be the best you can be
as a credit consumer. Pay
your bills on time. Use
credit judiciously, by using
only what you need and by
keeping the ratio of
balances-to-credit limits at
50 percent or less. Whenever
possible, use cheaper
credit, including home
equity loans.
Paying off debts is
always a better strategy
than consolidating. However,
a long term strategy,
keeping the ratio in mind,
is to consolidate and or pay
down large balances, leaving
one or two credit cards with
a moderate, reported credit
limit, for emergencies.
Shop around for the
cheapest rate, best terms
and avoid credit cards that
don't report your credit
limit and credit cards that
come with no credit limit.
Special zero-interest credit
cards can be a windfall if
you understand and
religiously adhere to the
small print. Shop around for
all financial services from
car loans to mortgages.
Don't double dip.
Applying for two or more
lines of credit
simultaneously may or may
not affect your score right
away, depending on the type
of credit, and the length of
time over which multiple
inquiries occur, but it
could send the wrong message
to creditors that you may be
in financial trouble or
biting off more than you can
chew.
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