Capital One vs. your credit score

Another running thread about credit scores had my mind on the subject and I thought this article might be interesting to some.


This is from a letter to Kiplinger's in the August issue concerned about the way Capital One doesn't report customer credit limits to the bureaus...

All Capital One customers should be as informed as you are about the company's policy. Capital One doesn't report its customers' credit limits because "we have always considered that a proprietary, competitive part of our business," says spokeswoman Diana Don.

But that policy can hurt your credit score. You're correct that when Fair Isaac compiles its so-called FICO scores, the company factors in what percentage of your credit limit you've actually used. The lower your "utilization ratio," the better. In the absence of a credit limit, the FICO system substitutes the highest reported balance from that creditor, explains Craig Watts, of Fair Isaac.

Unfortunately, that means good payment habits on your account could accidentally result in a lower score. Let's say your credit limit is $10,000, but you've never owed more than $1,000 and you typically pay your bill in full each month. Then you charge $500. "It looks like you're using 50% of your total credit available, even though your actual limit is much higher," says Gerri Detweiler, of EverydayWealth.com. It's usually best to keep your utilization ratio to 25% or less when you're about to apply for a loan.

it continues but that makes the point.

an interesting twist in the way your score can be affected only in this instance, it isn't some unknown arcane formula at Fair Isaac, it's the behavior of a creditor leaving FICO to make do with what information the creditor (doesn't) give them.

[vsjhoc]

Originally Posted by rexdart

... an interesting twist in the way your score can be affected only in this instance, it isn't some unknown arcane formula at Fair Isaac, it's the behavior of a creditor leaving FICO to make do with what information the creditor (doesn't) give them.

Very true. I have a Visa with Simmons First National Bank. I called them and complained that they didn't report my limit to the bureaus. They reported it right away.

So call any creditor (other than Cap One -- they can keep it in their wallet, as far as I'm concerned) who hasn't reported your credit limit, or has reported "N/A", or has reported your highest balance instead, and tell them to report the limit or you'll close the account and go with a competitor's card. [But don't actually close the account.]

[poundwise]

Clark Howard reported on this recently; the following is posted on his site:

"How to turn things around on Capital One

You’ve probably heard about the Capital One lawsuits going on. Clark has talked about the system Capital One has to damage your credit. Well, now Capital One has stubbornly refused to modify its position. What happens is Capital One does not report the credit limit on your card. Why? It lowers your credit score and therefore destroys your credit image with other potential credit card companies. So, you’re more likely not to get approved for another card and will continue to use the Capital One card. By not reporting your limit, the credit bureaus guess your limit and that makes you very risky.

Now a new lawsuit has been filed against the credit bureaus for reporting erroneous information on our reports. TransUnion, Equifax and Experian have some responsibility here, for sure. But it would be simple if Capital One just behaved itself. Clark has given Capital One the chance to come on air and talk about this, but they haven’t responded.

So, you have to decide if you want to be their customer. If you’re currently a customer and you want to stay with them, you should charge a bunch of stuff to the card and pay it off. Then, moving forward, the credit bureaus will see and use that credit limit, sending your score back up. Clark will keep trying to come up with ways to manipulate the system, but for now that’s the only way you can turn the situation around. "

[neatdesign]

Originally Posted by poundwise

Well, now Capital One has stubbornly refused to modify its position. What happens is Capital One does not report the credit limit on your card.

FWIW, Capital One phone reps are told that if customers ask why their true credit limits aren't reported, they are to explain that there is no law saying what creditors must report to the credit bureaus. That technically, Capital One doesn't have to report the account at all if they don't want to. (Until the last year or so, they didn't report small business accounts unless they were delinquent.) That Capital One's policy, for now, is to only report the highest balance and that they aren't required to explain WHY that is their policy.

I always found this very difficult to say to people, because the explanation is so lame and I felt I lost a lot of credibility with customers by having to say it. But I really didn't have anything else I could say to the customers' very valid points, nor could I tell them that I agree that it's a crappy, anti-consumer policy.

Originally Posted by poundwise

So, you have to decide if you want to be their customer. If you’re currently a customer and you want to stay with them, you should charge a bunch of stuff to the card and pay it off. Then, moving forward, the credit bureaus will see and use that credit limit, sending your score back up.

This is true. The only way to get have your Capital One limit more fairly reflected on your credit reports is to max out your card and then pay it off. Your highest recorded balance, whatever that is, will appear as your "credit limit". Otherwise you're really going to get shafted. You could have a $10,000 limit but only charge $300 at a time -- and your credit reports will say that you only have a $300 limit on your Capital One card. It's a bunch of bollocks.

~ Jenney

[sweeps]

I hear a lot of negatives about Cap One. Are there any positives about them? Why do people use their cards instead of the apparently much better alternatives?

[vsjhoc]

Originally Posted by Sweepsplayer

I hear a lot of negatives about Cap One. Are there any positives about them? Why do people use their cards instead of the apparently much better alternatives?

Ooooooooh, it's all those cute Vikings in their TV ads.

Who is their target market? I have the impression it's not people with stellar credit, but not the subprime contingency either. Somewhere in between?

[neatdesign]

Traditionally, Capital One's target consumers were subprime. It has been working over the past couple of years to turn the other direction, as well as to diversify the business in general (banking, auto loans, personal loans, etc). But I think it's been very, very difficult for them to shed the subprime image. In the three years I worked there, I think the highest credit limit I saw was $35,000, and that was only once or twice. It's amazing how many $200-$500 accounts they have.

FWIW, I would never want a Capital One account. My exposure to the way policies are constructed and enforced makes me wince at the thought. I also don't recommend them to others. It's not that people CAN'T have good experiences with Capital One -- it's just that there are so many possibilities that you WON'T that keeps me away.

~ Jenney

Capital One happens to be the only credit card I have, I only charge a few rotating things each month and I pay them off before they're even due (they're all bunched around the same week at the end of the month so I just login early each month and pay the card).

Anyway, my credit score has been over 800 for more than a year now so whatever the effect, it isn't much.

I didn't post the article to bash Capital One, just to point out the practice (which as was mentioned earlier is every bit their right, Fair Isaac is not a governmental department enforcing some law about credit scores to whom Cap One or anyone else is beholden.)

[poundwise]

Originally Posted by Sweepsplayer

I hear a lot of negatives about Cap One. Are there any positives about them? Why do people use their cards instead of the apparently much better alternatives?

Actually, I like Capital One just fine. I hear more negatives about Citibank and Chase than anyone... but then again... in the case of all three, it could be because they are among the largest issuers.

In my own experience, going back several years, I have only had one minor problem with Captial One, and that was fixed with a single phone call.

Citibank, on the other hand, is on my official 'never again' list.

[poundwise]

Originally Posted by rexdart

Capital One happens to be the only credit card I have, I only charge a few rotating things each month and I pay them off before they're even due (they're all bunched around the same week at the end of the month so I just login early each month and pay the card).

Anyway, my credit score has been over 800 for more than a year now so whatever the effect, it isn't much.

I didn't post the article to bash Capital One, just to point out the practice (which as was mentioned earlier is every bit their right, Fair Isaac is not a governmental department enforcing some law about credit scores to whom Cap One or anyone else is beholden.)

Yes, this really isn't a big deal. In fact, when you think about it, it could actually give a more fair representation of your credit management.

Frankly, credit scoring, one the whole, is becoming a fiasco.

[JoyJoy]

I have a MC and a Visa with Capital One. I have been a member since 1990. No complaints.

[Bluezy]

They are sending me a card as we speak. I am now scared

[b4freedom]

I used to have a Capital One card. It sucked. This is just another example of why.

[BignRichfan]

From personal experiances that I am going through right this very moment with capital one stay away from them PLEASE!!!! I have been fighting with them since December of 2005. Yes 2005.............. I even have the Pennsylvania Attorney Generals Office helping me fight them to no avail. My husband is a truck driver and was laid off for 1 month in december so we were unable to make Decembers payment, well since then they have charged us with so many fees and raised our interest rate from 14% to 28.99% as of today because of it. The worst part is, is that I have been paying on the account every month since. What they do is charge me a late fee of $35 every month even though my payment is never late and they say it goes way back to the december payment which the attorney general told them they had to refund all fees they charged me which by the way up until today has now somehow totaled $300 but they won't explain how they get this amount. It is a game they have been playing. 2 weeks ago we did a 3 way call where the attorney general, capital one and my husband were on the phone arguing over the $300 payment they said I had to make and the outragious interest rate they are charging me which is keeping my account over $3000 since January of 2006 so I can never pay it down. They just kept beating around the bush and putting us on hold for an hour. Finally they woman said I have to talk to my higher up and will get back to you in 48 hours, so the AT said no you have 24 hours to get back to me. Well 4 days went by and no phone call from capital one. My husband called the AT and complained that our payment was due in a couple of days. The AT had his supervisor call them but mysteriously no one was in the office at capital one. They have been trying to get in touch with someone for a week now. So I sent in my payment right not only did a whole .46 go towards the principal but they nailed me with a $35 late fee(my payment was not late) and they rased my interest fee .50%!!! I ask how can this be legal? Im sure they are doing this to other people also. I heard another person mention there are lawsuits against them, what are they for? I would love to go after them. If this does not get settled im just going to stop paying them. They have already ruined my credit and at this rate i'll be dead and still paying them off. Any advice would be great. Thanks and sorry for the long read guys.