Remember when AMEX lowered the credit limit of Kevin Johnson because he shopped at the wrong store? It finally showed the world that credit card companies rely on more than a FICO credit score to make decisions.
As a result of the recession and financial companies looking to slash their risk, some of the lesser known, “secret,” scores have started to rear their ugly little heads. As you probably expect, creditors of all types collect a massive amount of data. Wal-Mart tracks each and every purchase, it’s not surprising to expect that a credit card company would do the same.
As these companies build a dossier of your activity, they’re feeding it through their hungry algorithms that spit out scores intended to help them make better decisions. Sometimes they’re helpful, sometimes, as was the case with Kevin Johnson, they just make the company look foolish.
So what are some of these secret scores? Liz Pulliam Weston wrote about these 8 secret scores:
While a credit card issuer might check your credit scores once a month as part of its regular account review process, the same company probably checks other kinds of scores every time you pull out your plastic.
The eight secret scores are:
1. Credit-risk scores – This is your typical FICO credit score. (this shouldn’t be a secret!)
2. Response score – Likelihood you’ll respond to an offer.
3. Application score – Scores the “other” data on your application, not included in a credit-risk score.
4. Bankruptcy score – Likelihood you’ll file bankruptcy.
5. Revenue score – Likelihood you’re a profitable account.
6. Attrition-risk score – Likelihood you’ll stop using their card.
7. Behavior score – Scoring of a single account to determine future behavior.
8. Transaction score – Calculated each time you use your card to determine approval.
9. Collection score – Once in collections, collection agencies use this to determine collectibility.
As I was told over and over again as a kid, knowing is half the battle. Unfortunately, that’s all you can do at this point.
Jim writes about personal finance at Bargaineering.com.