HERE'S A NEW and important reason to check your credit history. Some of your lenders may not be reporting the full status of your account.
That's most apt to happen to the bank's best customers. They include on-time payers who habitually carry revolving debt. Or people close to their credit limits who could handle more. Or borrowers who were slow-pay in the past, but now are covering bills on time.
In the normal course of events, a competing lender would offer you a cheaper credit card or home-equity loan, or a card with higher credit limits. But your lender can stop that from happening by not reporting your account or not reporting it in full. That hides you from the competition. You become an unwitting credit captive. It's unfair, but entirely legal.
Credit reporting is voluntary for lending institutions. They do it because it's in their self-interest to see your total credit picture, including the loans you're carrying from other lenders. The more they know, the better they can manage their lending risk.
Credit reporting benefits consumers, too. Thanks to the amount of information lenders have, Americans enjoy superior access to mortgages, auto loans, credit cards and all other forms of credit.
Your credit history is held by one or more of the three, major credit bureaus: Equifax, Experian and Trans Union. Traditionally, lenders disclose how much credit they give you, your payment habits and how much you buy.
This information is collected and translated into a credit score. That's a single number, summarizing what kind of lending risk you are.
When you apply for new credit -- a credit card, department-store charge, mortgage or auto loan -- the lender checks your credit score. If it's above a certain level, you'll get the money.
Different lenders set different cutoff points. The interest rates and credit limits they establish reflect their assessment of the risk you pose.
Lenders also buy lists of names from credit bureaus, sorted by the credit characteristics they seek. If you make the list, you'll get a letter or phone call, offering you a better deal. Sophisticated lenders can tell from the credit lines, usage and payback rates whether a particular account might be worth stealing away.
The lenders that may not report credit data fall into two groups, says David Gibbons, deputy comptroller for credit risk at the Office of the Comptroller of the Currency (OCC), which regulates about 2,400 national banks:
Major credit-card lenders. They're trying to keep their best accounts from being pirated.
Subprime lenders. They grant mortgages, auto loans and credit cards to people with poorer credit histories.
Subprime borrowers pay higher rates, for smaller loans and credit lines. These borrowers hope to rehabilitate their credit, and qualify for lower rates, by proving that they can pay on time.
When subprime lenders don't report your history to credit bureaus, they're depriving you of the chance to pull yourself out of the hole.
Gibbons has less hope that subprime lenders will report voluntarily. The problem, he says, lies chiefly with certain consumer-finance and mortgage companies that aren't regulated by the OCC. They're happy to charge you higher rates as long as they can.
For copies of your credit report, call Equifax (800-685-1111), Experian (888-397-3742) or Trans Union (800-916-8800, for voice; 800-888-4213 for automated response). There may be a fee (up to $8).
If you see that your lender isn't reporting, or doesn't reveal all the data that other lenders do, write a letter to the president of the institution. Say that you're being treated unfairly, and will drop your loan or credit card unless you're offered a better rate.
Then assemble your payment data and apply for a new loan or card, in person, through a local lender. Subprime borrowers, in particular, should be able to find a better deal, if they can show that they pay on time.
Washington Post Writers Group
Pub Date: 8/23/99