Utilization of credit accounts for 30% of a consumer credit score. This is a substantial factor in the FICO model, utilization is calculated by dividing your current balance by the credit limit, example $500 balance on a credit card that has a $1000 limit: $500 / $1000 = 50 % Utilization Percentage
Higher utilization rates equate to lower credit scores. If a creditor is improperly reporting a credit limit or not reporting any credit limit at all, this can cause a significant decrease to a consumer credit score.
Many creditors refuse to report a credit limit and consistently mis-report by using the “High Credit” amount. High Credit is the highest amount that this consumer has used/charged on this particular account.
Let’s use the following as an example; consumer has an account with a $500 balance and a $1000 credit limit, the highest credit the consumer has used on this account is $500. The creditor mis-reports the high credit in lieu of reporting the credit limit, this interchanged the credit limit reporting by $500!
$500 Balance / $500 Credit Limit (Reporting) = 100% UTILIZATION!!!
That would DRAMATICALLY impact the clients overall credit rating. There are several ways to attack this type of misreporting.
The habitual offenders of this type of mis-reporting take the position that they are letting their “Company Secrets” out by divulging credit limits, and they take the position that they don’t legally have to report the limit.
Creditors must report 100% True an accurate data, therefore reporting a high credit in lieu of a credit limit could easily be viewed as a violation of the law.
Not reporting the credit limit data has been a long debated topic as well, the habitual offenders take additional positions that the reporting is not necessary because this is a contract between the creditor and the credit reporting agency.
A recent CDIA study released parts of the internal procedures for reporting to credit information by data furnishers to credit reporting agencies. Their study revealed a document furnished by credit reporting agencies that specifically noted that the “Credit Limit” and High Credit field were “Required” input data fields.
Two different methods can be used to quickly correct this on a client’s report. A standard dispute containing verbiage similar to the following:
Please update my account #XXXX to reflect, the actual credit limit, your reporting of this account with my high credit can easily be perceived as fraud and an attempt to diminish my credit rating. This improper reporting has caused me denial for credit and has caused severe financial and emotional distress. I am sure that is not your intention, and appreciate your expeditious response.
The alternate and typically easier resolution is to have your client charge items on their credit report to increase their “High Credit”, this is advice that should be cautiously given. Be sure to limit that advice to clients with means to immediately repay the debt and financial stability to carry through with your plan.
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