Does Your Lender Report Your Good Credit?

24 Aug Does Your Lender Report Your Good Credit?

If you have spotty or poor credit, you depend on lenders to help you build good credit. Just because you pay your loans off on time doesn’t really help unless the world knows you did it — through your credit report. Many lenders specializing in the “less-than-perfect” or subprime market don’t want you to have other choices so why would they help?

Recently, Capital One Bank announced it would finally start reporting credit limits to credit bureaus. On the upside, they did report good payment records. But refusing to report the limits — which the FICO credit score system uses to identify how little or how much of available credit has been used — kept scores lower for many years, resulting in higher borrowing costs.

So for many years Capital One was deliberately pursuing a policy which limited the choices consumers had and therefore made it more likely their customers would keep poorer credit ratings — and could be charged more. And Capital One never went out of its way to mention this policy to customers.

The policy change could help some people get out of the subprime penalty box faster. This in turn could be in the long-term interests of lenders who want to sell mortgages but cannot sell off subprime loans in the current market. So Capital One’s mortgage unit may benefit from the change.

And at least Capital One reported good payment histories. Many lenders in the subprime arena claim to be helping consumers rebuild credit with their easy-payment or rent-to-own programs. And then refuse to report to credit bureaus at all. Not by accident, this keeps consumers trapped in the subprime market with few other options but to come back again and again.

A similar tactic sometimes used by predatory lenders is to extend only limited credit lines so you will quickly use it up. They may even offer you several credit cards or credit lines of small amounts you can max-out. Not by accident, this may help jack up their fees for making the loans, over-limit or late charges, and so on. Of course they may all be reported to credit bureaus — but the result could be to make you look worse. Even though the total borrowed may be less than the typical credit card balance prime borrowers have, you look like a shopaholic –and a bigger risk.

When considering borrowing money to rebuild your credit score, make sure the lender reports your good behavior to the credit bureaus, completely and accurately. If possible, get them to put it in writing. If they won’t report, then they probably want to keep you trapped with poor credit so “what’s in your wallet” ends up in their wallet.

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I have been a bankruptcy attorney since 1989. Our firm represents consumers filing bankruptcy almost exclusively, although I have represented bankruptcy trustees as well as creditors. For 2017-2018 I am also serving on the American Bankruptcy Institute's Commission on Consumer Bankruptcy. If you live in Eastern Missouri, visit our website, send an e-mail or give us a call (314) 781-3400. Our website: STLBankruptcy.com
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