Most credit cards report three pieces of information to the three credit bureaus:
- Your payment history
- Last month’s balance
- Your credit limit
Your payment history shows that you pay on time — or not!
Last month’s credit card balance shows how much you owe on that card.
Your credit limit shows how much you could borrow on the card.
Between last month’s balance and your credit limits, you can see how much of your available credit you’ve used. That’s important because a big part of your credit score is based upon how much of your total available credit you use. If you divide the total balance on all of your credit cards by the total credit limit on all of your credit cards, you get what’s called your debt utilization ratio.
The lower your debt utilization ratio, the better it is for your credit score. Less than 50 percent is good and less than 30 percent is ideal.
Unfortunately, some credit cards do not report your credit limit to the credit bureaus. Carrying a balance on these cards could lower your credit score.
What credit card companies do instead
When a credit card company does not report your credit limit, they may instead report your high balance. That is the highest balance you have had on that card in a certain time period. That high balance becomes your credit limit for the purposes of credit scoring.
So if you made a big purchase on your credit card (say $2,000) one month, paid it off, and then regularly only charge a few hundred dollars to that credit card, your utilization ratio will be okay. But if you routinely make a few hundred dollars in monthly purchases and never exceed that amount—that credit card account could appear maxed out on your credit report (even if you pay it in full each month!) That’s not good.
Why credit cards that don’t report limits can be bad
When your credit card company reports a high balance rather than your credit limit, even a small balance on that card can raise your utilization ratio and lower your credit score.
Which credit cards do not report credit limits?
I can’t provide a comprehensive list of all credit cards that don’t report your credit limits, but I do know of a few.
Charge cards, such as the green, gold and platinum cards from American Express, don’t have credit limits. They report your high balance instead. This also holds true for many “no pre-set spending limit” credit cards. I have heard that certain Visa Signature cards may not report balances, but I can’t confirm this.
Do you know of other credit cards that do not report your credit limit to the credit bureaus? Let us know what they are!
Want to ditch a credit card that’s doing this to you and find a new one?