Released: July 02, 2006

Lawsuit claims bureaus’ practice lowers credit score

Source: By Kenneth R. Harney, Syndicated Columnist [Columbus Dispatch]

In a case with potentially far-reaching significance for home-mortgage applicants, a South Carolina consumer has filed class-action lawsuits against the three national credit bureaus, alleging that they allow a practice that lowers millions of individuals’ credit scores.

Depressed scores raise the interest rates and fees that are quoted by mortgage lenders at application. Sometimes the higher rates lead to monthly payments that are hundreds of dollars er than they should be.

The three suits allege that, under the federal Fair Credit Reporting Act, the national bureaus — Equifax, Experian and TransUnion — are required to follow “reasonable procedures to assume maximum possible accuracy of information in consumer (credit) reports.”

Nonetheless, William A. Harris Sr. said in his complaints that each bureau allows creditcard giant Capital One to withhold the credit limits on its customers’ card accounts, knowing that such omissions frequently lower credit scores. available credit. The higher the usage of credit relative to the limit, the lower the score.

To illustrate, say you have a credit card with a $5,000 limit. The highest monthly balance you’ve had was $2,500 — a moderate 50 percent utilization ratio. But if your card company refuses to report your limit, the scoring software might substitute your highest balance in place of your actual limit to compute your ratio.

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