One of the chronic pains of being a Capital One credit card customer is that your credit score can suffer even if you pay your bills on time every time. The reason? Capital One has a long-time policy of NOT reporting your credit limit to credit reporting agencies. What it did is to report your actual credit usage as a proxy of your credit limit.
How will this affect you? Even if you only tap into a small percentage of your credit limit, you will be seen by credit reporting agencies as using up all your credit lines (in Capital One cards), and that is certainly not good to your credit score.
Why did Capital One want to do that? According to Washington Post's quote back in 2004:
McLean-based Capital One Financial Corp., one of the largest issuers in the country, heavily markets its cards to young consumers and individuals with imperfect or thin credit histories. It says it does not report any customers' limits because "we consider [limits] proprietary" information, and "because we do not think it would be appropriate to impact the individual's Fair Isaac score -- positively or negatively -- by reporting them."
Capital One customers can now take a breath. The credit card behemoth is changing the policy now to be more customer friendly (or credit score friendly?). According to Seattle Times:
Capital One Financial, based in McLean, Va., says it will now report all cardholders' credit limits to the three national credit bureaus — a step that could boost the FICO credit scores of some of its 50 million card customers by 40 to 80 points or more within a few months.Higher FICO scores, in turn, will allow Capital One cardholders to qualify for lower mortgage-interest rates when they buy or refinance homes. An increase of just 41 FICO points — from 659 to 700 — would cut an applicant's mortgage rate quote last week from 7.68 percent to 6.59 percent on a 30-year fixed-rate mortgage of $300,000, according to Fair Isaac, the developer of the widely used scoring system.
One cannot say this dramatic change is purely driven by the current credit squeeze in every corner of the financial market, but that's certainly a factor. Without this change, customer service department at Capital One will certainly get more calls than usual from frustruated bill-paying customers who couldn't get satisfactory borrowing rates in today's market because of Capital One's non-action.
