Photo: Joe Penniston
“You don’t look a day over 29.”
“The check’s in the mail.”
“It was the dog.”
We all occasionally stretch the truth, but did you know your financial provider tells fibs, too?
No need to rat anyone out just yet — some of those little white lies may actually be boosting your credit score. Let’s see whether any are hiding in your credit file.
Sins of omission
Many lenders fail to fully report to the credit bureaus. They may leave out payment information or even the existence of an account.
That’s not necessarily an oversight you want to fix. If you’ve been a little lackadaisical about paying your bills on time, count your blessings and vow to pay all future bills on time, just in case the lender decides to kiss and tell.
If, on the other hand, your payment history with a particular lender is stellar, you might want to pipe up about invisible accounts and missing payment data. The lack of information can make you look lame to lenders. If most of your accounts have no payment reporting information and you’re a stickler about on-time payments, a potential creditor can’t tell whether you’re a good or a bad bet.
If your credit file is thin, call your nonreporting lenders and ask them to communicate more information about your account, if possible. And remember, just because information doesn’t appear on one of your credit reports, that doesn’t mean that it’s not included on another. Reporting companies aren’t required to share information with all three major credit bureaus (Equifax, Experian, or TransUnion) — or any of them, for that matter.
Remember that Discover card you opened to get those airline miles you needed for your Hawaii trip back in 1999? After you earned your miles and stopped using the card, your lender may have forgotten about you, dear customer, as well.
When you shove a card in your sock drawer and stop using it, it may go into a deep sleep in your credit file. With no payment information to report (and when you stop using a card, there’s not much to say), your bank will simply stop reporting anything to the credit bureaus. (The time frame varies from lender to lender, but it can happen in as little as three months.)
For those who have trouble keeping track of multiple bills and paying them on time, an account in hibernation may help keep your record clean, since after several months a late-payment ding will have less of an affect on your score. Still, remember that hibernation does not mean “disappearance.” Unused accounts are still listed as open lines of credit on your report until you or your lender formally cancels the card. (After that it will be reported as “closed.”)
Don’t assume that all’s well on an old, unused account. Check up on it occasionally — make sure you don’t owe some annual fee, or that the card isn’t being used fraudulently and the bills sent elsewhere. If you truly doubt that you’ll ever use the card and it’s not one of your oldest accounts, consider closing it. But beware of canceling credit cards willy-nilly. Doing so may actually hurt your credit score.
Covert credit limits
A surprising number of lenders simply do not report consumer credit limits. Keeping this information out of your file is not necessarily an innocent oversight. Without that key piece of data, competitors are less likely to poach clients with preapproved offers.
Capital One caused a stir when its credit-limit reporting tactics became public knowledge: Instead of reporting customers’ credit limits, it reported the highest balance carried, which gave the appearance that customers were much closer to maxing out their cards (a no-no for a stellar credit score) than they really were. (FICO scores no longer use this piece of Capital One data when computing consumer credit scores.)
You may want your credit card company to keep mum about how much it trusts you to spend, particularly if the spending limits on your cards are really low. Potential lenders see low limits as an indication that you haven’t earned a lot of leeway and that banks don’t want to give you too much slack in the leash, since they’ll be left with greater losses if you ran off without paying your bills.
If you want your lender to report your limits, and it’s not Capital One, call and ask. Sometimes, it’s company policy not to report, but at least you can try.
Finally, let’s all give thanks to the banks that occasionally turn a blind eye or — intentionally or not — say something that’s maybe not exactly true. For example, did a lender forget to report a late payment or two? Is some business claiming you’ve been its stellar customer for longer than you actually have been? Has a past creditor forgotten to mention to the credit bureaus that you’re no longer doing business with one another? Such mistakes can actually improve your credit standing by overstating how good of a borrower you are. Start composing a heartfelt thank-you note to MasterCard when you get a sec.
You can keep mum and pretend you didn’t see any of your lenders’ errors — just smile and nod. But don’t be surprised when a company finally sets your record straight. After all, little white lies can’t get you out of every pickle.