Image may be NSFW.
Clik here to view.
A complete home and money know-how includes a solid understanding of a variety of topics – some you may not think go hand in hand, including your credit, home appreciation, mortgage options, budgeting and rainy day fund. To help you stay ahead of the curve, I’m starting a Home and Money Tip series that will provide you with tips on a regular basis about all things home and money. Today’s tip:
Tip #1: Beware of credit cards that only report your high balance to the credit bureaus.
You see, your credit card companies report all sorts of information to the three main credit bureaus: Experian, TransUnion and Equifax. Typically, one of those pieces of information is your credit limit. This is an important bit of data because one of the big factors in your overall credit score is how much credit you have available to you (your total credit limit) versus how much of that credit you use.
[Free Resource: Check your free credit report and score]
When your credit card companies report your real credit limit, all is well. However, some credit card companies only report your high balance, which is the highest amount you’ve ever charged on your credit card during one pay period. When this happens, the credit bureaus are forced to use this high balance instead of your credit limit in their equation to determine how much credit you have available to you versus how much credit you use. And if you’ve never had a large balance on that card during a single pay period, you lose.
Here’s an example: Let’s say I have a credit card with a $10,000 credit limit. My current balance on that card is $1,000. The highest I ever took my balance on this card was $1,500. If this credit card company reports my full credit limit and balance, then I’m in a good place, as I’m only using 10 percent of my available credit on this particular card. However, if this company reports my high balance in place on my credit limit, then all of a sudden — and rather inaccurately — I’m using 67 percent of the credit available to me. Depending on how much of the credit I use on my other cards, this may not make or break me. However, it can have a negative effect on my credit score.
How do you know if you have one of the cards that only report your high balance? If you have a no-limit card, there’s literally no limit to report to the bureaus, so your high balance is often used instead. If you don’t have a no-limit card, you can find out what your credit card companies are reporting by taking a close look at your credit report. If what’s shown as your credit limit matches your high balance (assuming you’ve never used 100 percent of the credit available to you), you likely have one of these cards.
[Free Resource: Check your free credit report and score]
If you find out you have one of these cards and you’re unhappy about it (out of sheer principle, I don’t like this practice), don’t close the account! This will just negate the credit available to you on this card in the bureaus’ overall calculation of credit used compared to credit available. I’d advise paying off any remaining balance you may have and not using that card again. There are endless options for credit cards out there — go find one that suits your lifestyle and treats you right as a customer (including reporting the right information to the bureaus).
Beware of Credit Card High Balances was originally featured on Quizzle Wire
Quizzle.com is the easiest way to get a complete understanding of your credit. Visit Quizzle.com to get your free credit report and score. No credit card or social security number necessary!
