Financial Protection

Why does your bank mask your credit score? To keep you from shopping around.

Wait, I pay my credit card bill on time. Why doesn’t my bank tell the credit bureau how much I paid? Won’t that make my credit score appear lower than it should be?

The federal CFPB estimates that more and more of the nation’s biggest banks are “deliberately” withholding your full payment information from credit bureaus. That makes it harder, or even impossible, to calculate accurate credit scores. Other credit card companies might not make you offers of better deals. The information in your account “tradeline” makes no sense.

Why? Your bank doesn’t want to lose a profitable customer, so it makes it harder for you to shop around.

One simple trick is to report only your card balance of X, but not your [higher] credit limit of Y.  Your account would seem to be “maxed out.” Your credit score would plummet. You would not appear to be a good risk to receive other credit offers. So much for shopping for a better deal.

As I noted here last year, I brought this seamy practice to the attention of the Senate Banking Committee 20 years ago, (as did the Federal Reserve Board, too!), and the big banks cleaned up their act for a while. But the CFPB reports they’re now up to their old tricks. The CFPB says it “will also brief the appropriate financial regulators and law enforcement agencies on our findings.”

Law enforcement agencies? Yup, the CFPB says we “didn’t seek to investigate whether entities explicitly colluded,” which could be illegal, but they apparently found enough evidence to suggest it.

We like a marketplace where the best companies get ahead by making the best products and consumers can shop around for the best choices and best ways to save money. That’s why we like the CFPB. It’s doing its job, fighting for consumers.

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