Step Three: Make Sure the Credit Bureaus Are Reporting Your Proper Credit Limit
When I first started learning about credit, I was shocked to learn that credit card companies often report the wrong credit limit to the credit bureaus—intentionally!
This hurts your credit score because it causes your utilization rate to appear unnaturally high. Remember that your credit cards should never carry a balance that exceeds 30 percent of the limit. If your credit card company is reporting your limit as lower than it actually is, your utilization rate will appear too high.
Imagine that you have a $1500 balance on a credit card with a $5000 limit—a 30 percent utilization rate. But the credit card company reports your credit limit as only $3000. Now your utilization rate appears to be 50 percent. Having too high of a utilization rate is one of the reasons people have bad credit. .
Why do credit card companies fail to report correct credit limits? The theory is this: They do not want to lose their client base. If other companies see that you have a high credit limit and a positive credit score, they might solicit your business. By failing to report the correct credit limit, credit card companies keep your name off mailing lists and better retain your business.
And sometimes credit card companies don’t report any limit at all; when this happens, credit bureaus might report your limit as $0, meaning any balance you carry will make you appear to be over-the-limit, which is bad for your credit score!
If your credit limit is not listed on your credit report, or if it is inaccurate, contact your credit card company and ask it to correct the mistake immediately.