A key factor that credit evaluators consider when
they assess the creditworthiness of an individual is
credit utilization. If a creditor fails to report a credit
limit for an account, credit evaluators must either
ignore utilization or use a substitute measure such as
the highest-balance level—that is, the largest amount
ever owed on the account. Substituting the highestbalance
level for the credit limit generally results
in a higher estimate of credit utilization because
the highest-balance amount is typically lower than
the credit limit; the higher estimate leads, in turn, to
a higher perceived level of credit risk for affected
consumers.
For the June 30, 1999, sample of individuals,
proper utilization rates could not be calculated (the
highest-balance levels had to be used) for about onethird
of the open revolving accounts because the
creditors had not reported the credit limits. At that
time, about 70 percent of the consumers in the sample
had missing credit limits on one or more of their
revolving accounts. Circumstances have improved
substantially since then because public and private
efforts to encourage the reporting of credit limits
have resulted in more-consistent reporting. Nevertheless,
in the sample drawn as of June 30, 2003, credit
limits were missing for about 14 percent of revolving
accounts, and the omissions affected about 46 percent
of the consumers in the sample. Thus, although the
incidence of missing credit limits has fallen substantially,
it remains an important data quality issue.
