I was recently listening to Clark Howard when the subject of Capital One credit cards came up. As you may or may not know, Capital One only recently started reporting credit limits to the credit bureaus. Previously, they had been reporting the highest balance in place of the actual credit limit.
This was a very significant policy change for consumers since credit utilization (i.e., the proportion of available limits that you currently owe) is a major component of your credit score. In many cases, a customer’s highest balance is substantially lower than their limit. Thus, the practice of reporting highest balances instead of limits inflates their credit utilization, thereby damaging their credit score.
I always wondered why it was that Capital One did this, as it seems like such an easy thing to get right. Well, according to Clark, Capital One was doing this intentionally to hurt their customers’ credit scores in order to make them appear less creditworthy, and thus less likely to be able to take their business elsewhere. This is a fairly provocative statement, and it was made in the absence of any evidence, but it makes perfect sense.
The real problem with this practice is that it has manifold effects. Indeed, your credit score now influences many facets of your life, including your ability to rent property, get a cell phone, get affordable car insurance, get a decent mortgage rate, or even get a job. Nice. In an attempt to keep them from leaving, it appears that Capital One may have been sabotaging their “valued” customers in ways that extend well beyond the realm of credit cards.
Assuming this to be true, there’s no way I’d willingly do business with a company that is capable of such things, even if they’ve apparently changed their wicked ways.
To check if your credit score has been affected by this, sign up for free at Credit Karma.