Are you an owner of a Capital One credit card? And did you read all the fine print before applying for the card? If you are one of those people who will sign their life away to just about anyone who puts a piece of paper with a big X indicating to “sign here” on it, you may want to think twice before you do it again.

Before revealing Capital One’s secret, I must first give you a little education on credit scoring. There are a lot of credit score misconceptions going around and you could easily be misinformed. However, one little fact that holds true is that your debt to line of credit ratio has an impact on your credit score. If you have a credit card that holds a line of credit for $4,400 with an outstanding balance of $800, you can say that you have a good debt to line of credit ratio. FICO scores will show your ratio and determine if you are at high risk for holding debt. The higher the line of credit and lower of outstanding balances, the better your credit score will be; not to mention the better your chances are for obtaining other loans.

BIG PROBLEM: Capital One does not report your line of credit to the credit bureaus. In fact, they only report your highest outstanding balance that you hold on the card. Let’s say that the highest balance you have ever reached on the card was $1,800. Your credit will not show your line of credit, thus making you look as though you are at high risk for holding large amounts of debt.

Why do they do this? I’m not really sure. My guess would be to keep you as one of their customers. Once they have you, and have ruined your credit score, it will be very hard for you to be approved for credit cards from other companies, therefore forcing you to keep them as your credit card carrier.

Next time, supposing you haven’t already signed your life away with Capital One and have your credit score ruined, you might want to double check on the scoring of your credit.

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This entry was posted on Wednesday, April 19th, 2006 at 1:58 pm and is filed under Credit, Debt. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.