That's not our queen!

I want someone to dig into all of this other data collection and bring it all to light to consumers. How it works, what actions create what kind of scores and where this data is being collected from. This is like playing football and only the other team knows the rules and has a playbook.

The collections score portion sounded intriguing so I Googled it. It seems to be a core practice in collections.
[www.fico.com]

I had an old zombie debt that has been in dispute for years along with some others I had long paid off that kept sending me a letter every month wanting me to pay these. It suddenly stopped sending me letters after I won a case against another debt collector. The other collector had an error on their books. I had paid off the debt in full (medical bill) months before. They refused to believe me. Luckily I had good records and proved I owed them nothing. It was fun watching the judge dress down their corporate lawyer and two collections people.

This whole behind the scenes date modeling is really creepy. It makes me wonder what else these companies are gathering about you.

@bohemian: This is all tip-of-the iceberg stuff. These are base-models. They aren't even getting into the permutations - because your FICO is generic where a credit card company will look at a credit card FICO, a mortgage lender will look at a mortgage-FICO and an auto company will look at an auto-fico - all of which have different models.

On top of that, individual institutions also develop internal scoring models. These are based on their own portfolio performances and are more likely to change faster than anything the bureaus offer. The scales are different and the items that they look at follow the items that have proven to be more indicative of payment behavior in their portfolio(s). You will never know this number (the "internal score" does still follow all lending regulations).

It is a risk-based business, so it is data-driven.

I work for a small software firm. We have about 100 clients, and each client has 1 - 4 contacts that we deal with.

People around the office know who the pain in the ass customers are. People around the office know who the pain in the ass contacts at those customers are. We know "hey, this guy working for client A is cool and smart, he'll see the value in that service [we're selling him]." We know "hey, that guy working for client B is cheap and will argue invoices, so don't do anything unless he approves it".

Aren't these scores the article mentions essentially doing the same thing, except AMEX assigns a score to the client whereas ours is less computational? AMEX's system works on a much larger scale, and supports dealing with clients where there is no personal relationship. Ours is more word-of-mouth based on personal experiences.

I guess I don't see the shock and horror of credit card companies doing this. It's a tool for the business they're in. It's about sizing up the customer and determining if they're worth the cost of pursuit.

@Stephmo: and I can just guarantee that if you try and bring this stuff to light you are going to have to deal with legal battles and "Trade secret" BS. I think we can all agree there's a good reason the industry doesn't want us to know this stuff.

It's not just credit card companies who do this (Although credit scores are by far the most complex and influential case). When I worked for Sprint every account had an internal "score" attached to it and the higher your score was, you had better odds of getting a credit there was no way to prove you were owed, or getting a deal on a phone.

How did you get a higher score? Simple. If you spent lots of money with us, had several lines on your account and paid in full every month, you were a star customer in our system.

Speaking about credit cards, and AMEX, anyone else noticed that they lowered the AMEX Blue cashback percentage on "Everywhere Else" purchases from 1.5% to 1.25%? Just noticed it today, I'm pretty sure it just changed this past month. This happened to anyone else?

@NoNamesLeft: Can I please sage in a Consumerist thread? PLEASE?!

@rpm773: Yes, be courteous to those whom you conduct business with, and (usually) you will get better treatment than if you're a PITA. That's not terribly surprising to anyone I don't think.

I think the biggest issue of concern is what variables exist that may not have more than a tenuous logical relevance at best, but which may have a fairly strong statistical correlation.

For instance, were it shown that persons who purchase ATV's are 6% more likely to default on their credit cards than a comparable demographic who don't. Then it could follow that one of these secret credit scores would take a dive upon purchasing one. The odds that you personally will default haven't changed, only that you've joined a demographic with a higher incidence, and you've unwittingly reduced your credit rating in doing so.

From the creditors' standpoint, it's logical to conclude that were this information to become public, it would lose most or all of its validity. Imagine knowing the above data beforehand. Would you be as inclined to charge an ATV? If you learned that JetSki purchasers were considered better than average credit risks, would you become more inclined to purchase one of those instead? If nothing else, such information would almost certainly have an adverse effect on the ATV industry, while creating a boom in the JetSki industry. -- At least until so many folks with poor credit overextended themselves buying JetSkis to improve their credit scores, before defaulting.

It seems wrong, perhaps criminal, to keep such information secret from those whom it affects, yet as my example points out, publicizing it would instantly invalidate it from the statistical standpoint, which currently appears to be an effective business model for the credit industry.

@bohemian: it seems more like getting asked over to play sandlot baseball and not finding out the other kids are playing football until you get tackled

I was going to use my Amex card at a liquor store this week...then I remembered this profiling deal and used my debit card,instead.

I hope others are responding the same way...it will cost them (Amex)in the long run..

9=8?

Great information, otherwise. :)

@catastrophegirl - just add kittens: Well, one of the main problems is that you have different people using the same data within an organization to do different things - and these sections are often at odds with one another.

Your FICO score is basically supposed to be a predictor of likelihood of repayment. (Nutshell.) So this explains the permutations and why they exist - maybe someone with so-so credit really pays back autos well...and that's a good thing to know.

But here's the rub. Collections typically will armchair quarterback high-profile losses in lending institutions. These are typically as follows:
- Defaults within the first 6 months.
- No-Payment defaults.
- True-Name Fraud
- Fraud Rings
- Thin-File Defaults

Typically, these types of losses generate meetings - tons of meetings. Meetings after the loss, meetings when the loss is going to be a potential loss, meetings about how to avoid these losses in the future and MOST OF ALL - meetings about how to improve credit buying practices.

This is how multiple scoring products are built.

The problem is that scoring products can't be perfect. It's predictive - not psychic. It's an important distinction, but people want perfection when it's impossible.

And this is where the internal scoring models come in - some companies do it internally, other companies do it for you - to "enhance" predictability.

@mianne: Well said. Even with hints at the FICO, we saw people piggybacking off of other's good history via becoming an 'authorized user' (I believe this loophole has since closed).

@mianne:

The thing is, buying an ATV doesn't all of a sudden make you more likely to default, but buying an ATV _does_ provide a new piece of information about you that's useful in determining whether you're more likely to default.

@Jason Asylum: FICO score isn't really secret. The 'secret' ones are the 8 non-FICO scores.

@dveight:

It went down to 1.25% as of June 1st for existing cardholders (think they were already doing it for new accounts for a couple of months before that) - they did mention it in one of those "notice of changes to your account" blurbs on my April statement. I have a couple of other cards that pay 1.25% on everything (and don't make me wait until the anniversary of opening my account to redeem it, either), so the Blue Cash is getting used that little bit less often. Still a nice little earner, though, just... not quite so good as it was.

So - my "secret" score will go down because I live in a rural area and shop at Wal-Mart, K-Mart, and our local grocery store chain within 7 miles of my house, instead of driving 25-30 miles ONE WAY to get groceries at Wegman's and shop at Macy's? The latter option allows me to waste gas and time, and spend lots more money. What a crock.

@MsAnthropy: Yep, just checked my April statement and sure enough it's there. Guess I need to be a better Consumerist by reading all of the fine print; but atleast I check my balance every week or so. So, what are the other cards that you speak of? Maybe time for me to switch cards; don't like the fact that I have to wait till the end of the year (gives them plenty of time to cancel my card and then give me nothing!)

@mianne: How would it be criminal for a business to assign a risk (or some other kind of measurement) to it's customers. I bet that every business does (even the one you work for). It just makes sense. While I didn't particularly know what those scores were it is irresponsible to think that a company isn't mining as much data about you as possible. You are a pattern each and every company in the world is trying to find which one you belong too so they can determine 1. if it is worth doing business w/ you and 2. if it is, how can they get more business out of you.

@dveight:

I get 1.25% back on my BofA AmEx (Accelerated Cash Rewards, or whatever it's called) and US Bank Visa (Cash Rewards Platinum, or somesuch... I can never remember the names) - but that's 1.25% back on everything, no 5% on gas/groceries/drugstore purchases like with Blue Cash.

I'm really bad at reading all that fine print, too, I have to confess. I think I'd seen it posted elsewhere that AmEx was reducing the cashback %, and so when my statement appeared online a couple of days later, I made extra effort to check.

That worries me too - I don't mind waiting until the end of the year for my rebate (as it's a nice chunk of money to have credited to my account all at once), but I'm less happy about the possibility of not getting anything at all if something sets off AmEx's infamous hair-trigger between now and rebate time!

@mianne: I remember a consumerist not that long ago that pointed out that people's APR were changing in reaction to where they shopped! It's insane. That has nothing to do with being a PITA

@LibraryGeek: The courteous vs PITA remark was more in response to the OP's premise about learning who the problem clients were and how to deal with them.

Even so, if you call your creditors and politely ask for a lower interest rate, the CSR may be more willing to take some time to find a better rate than what the computer spits out, vs. if you call and DEMAND they reduce your fees immediately. No guarantees, as in the adage of the squeaky wheel getting the grease, etc.

@captainpicard: Not criminal to data mine, but seems like it should be to adversely affect one's credit rating (and by extension their cost of living, employment prospects, etc, etc. based upon some arbitrary data which doesn't specifically point to the specific consumer's credit risk, but rather upon innocuous statistics among a large cross section of people, for which this deleterious activity isn't disclosed, thereby giving the customer no way of knowing why their credit was adversely affected, nor how to resolve it.

@rpm773: But most people with some common sense will know that acting like a jerk will erode a relationship with another business or a client and that the other business will be less likely to offer you a deal, cut you some slack if your the pain in the but.

With these predictive models they are totally secret. You don't know what actions will make you a "jerk". Buying groceries at the Kroger on one side of town vs. another? What items you happen to buy? Does a junk food buying binge make you a bad credit risk? The level of invasiveness is a real privacy violation. There are also way too many actions you could take that are flagged as predictors of bad behavior that really are not. So someone taking an action that is seen as bad will get labeled as bad even if they really are not.

Now take this internal modeling and data sharing to a worse level. Employers. What if employers and the HR department started buying this deep detail information about your life, buying habits etc. to build models for scoring employees. I could easily see some company doing this. Claiming what kind of toothpaste you buy is an indicator someone might be a bad employee is nowhere near reason enough to invade your life.

At some point this kind of crap has to stop.

@chilled: I just want to know what actions have what outcomes in these various scoring models with cards, banks etc.

So you know for sure that a certain purchase will cause a certain result. I have no problem paying cash if I know a purchase will flag something.

I have noticed that the instances of being asked for your phone number at the cash register has all but died off. I really want to know why everyone started doing it and stopped doing it at the same time and who they were storing that data with.

@NeverLetMeDown: Additionally, there's a little self-fulfilling prophecy at work. You buy an ATV and are flagged as "likely to default." So, AMEX drops your limit to just above what you owe. This drops your credit score, which can drive up your interest rates meaning you end up owing far more than you anticipated. (And, AMEX being AMEX they probably didn't tell you they lowered your limit and you found out when you made a purchase at Costco which resulted in overlimit fees and the shame of having no alternative form of payment because effing Costco doesn't accept any other forms of payment). Then, Chase sees the problems you're having with AMEX and gets nervous - so they jack up your monthly payment to twice what it usually is, and suddenly you can't afford to keep up with the excessive payments and interest and you default. All "because" you bought an ATV.

The whole thing is a scam.

@captainpicard: But SERIOUSLY? I'm a risk of default because I charged a latte? Yeah, financial stress is far more likely to be the reason for using Visa at Starbucks. That makes way more sense than leaving my debit card on my desk by mistake. Obviously I'm a HUGE financial risk. /sarcasm

"Response score - Likelihood you'll respond to an offer."

And you thought there was no use for the negative numbers you studied in high school algebra!

@bohemian: Or insurers. Say someone determines that Crest really IS better for your teeth than Colgate. Charge a tube of Colgate and your dental insurance rates go up...even if the tube was for your mom and you're a Crest loyalist.

@bohemian: A couple things

I think there is a self-policing mechanism here. AMEX uses this modeling to determine a number of factors about whether to do business with someone. If AMEx's modeling prevents it from doing business with too many people, well, it goes out of business. So AMEX makes adjustments. That may not help some one person today, but AMEX is trying to reduce its risk and that's the way it goes.

Regarding employers: I think we're talking about a different concept here. Employers may look at a credit report and do their own analysis to determine if someone is worth hiring. But the article doesn't say anything about this data getting shared, even with other credit card companies. much less HR departments. And these numbers are pretty specific to what they represent, and therefore I suspect they'd be of little use to HR depts. What does HR care if I'm likely to respond to a credit card offer?

As an aside, are there any HR people out there that would vouch for employers looking at FICO scores? I looked on the web, and only saw some self-serving claims by financing websites that FICO scores are looked at. And nothing to back up any of those claims.

@bohemian:

"I have noticed that the instances of being asked for your phone number at the cash register has all but died off."

Technology probably killed it. Lots of folks have throwaway phones now so a phone number doesn't mean very much.Back when everybody had a wired in phone,it could serve as a (very) crude screening device for basic creditworthiness. Only the transient and really poor didn't have a permanent number.Now you can buy a phone at Walmart for 10 bucks and in 10 minutes ,have a working phone number.And with caller ID being standard with wireless phones , you can just ignore calls from people that you don't want to talk to.

@burnedout: what you fail to point out is that it isn't just the latte, but there are a thousand data points that can come together to determine if you are a risk, TOO many lattes + too many clothes + too many cd's + too high debt to wealth ratio, etc. The story about the amex / walmart issue I think was blown out of proportion, obviously this particular person fell into category of people. It is impossible for a business to give each person individual attention & thorough scrutiny to determine where they belong so categories and patterns are determined. The financial institutions look at your spending habits AS A WHOLE not just one particular score or item (which is the same that each one of us should be doing on our own). It is financial stereotyping but what else is there?

@mianne:

While I agree with your argument in theory, that one purchase may slide you into a higher-risk demo without actually changing anything about your individual financial situation, it just struck me funny that you used the example of an ATV. Since 60 (or 20, or whatever number they're using today) percent of bankruptcies and defaults are the result of personal injury/medical bills, then I'd say that purchasing an ATV would indeed raise your risk of default by seriously endangering your health.

Again, agree with your point, amused by the example. Carry on.

@burnedout: I believe Costco also accepts cash, checks, and debit cards. Their self-checkout line once wouldn't accept my AMEX card for reasons we never did figure out, so I paid by debit card. And last time I was there, the person ahead of me in line paid by check. Just FYI.

What about other data bases/scoring systems industries use & share that greatly affect us as consumers & human beings such as:
- all varieties of insurance records (called CLUE, by ChoicePoint),
- tenant-history data (by ChoicePoint),
- pre-employment screenings (by ChoicePoint),
- medical history (the Medical Information Bureau's database),
- bank accounts (ChexSystems, by eFunds Corp.).
And don't forget about the data gathering that is done to identify who we know & where we go (such as used by collectors to identify relatives/friends/neighbors of a debtor as well as potential phone numbers/addresses/employers/etc.).

Well at least CC companies don't know WHAT you buy, only the grand total $$ of a charge.

Speaking of CC companies, I discovered recently that Chase no longer generates a confirmation statement of payment made IF your balance is zero. I'm not sure this is legal. With no statement available either online or in print form, it is impossible to verify that they actually received your payment. And it makes it more difficult to reconcile your account in programs like Quicken.

I know for a fact AmEx does not cancel/lower the limit in response to where you shop. It may sound that way in the letter, but I would say what happened with the Kevin guy was that he tried to purchase something from his own business. If you own a business and you buy anything from your own shop with the card that usually results in cancellation of the card. He is lucky he got to keep the card with only a lower limit. I'm not saying that is definitely what happened, but it's the most likely scenario. If you read the contract it says you can't do that without action being taken against you. AmEx does use several factors to determine your credit limit and if your score drops by a fraction of a point it's grounds for cancellation/lowering of your limit. These limits are not set by a real person. It all goes through a computer that calculates your score and changes your limits as it sees fit. It does not care what your situation is or who you are, if your numbers don't fit your current amount, it is changed. Really when it comes down to it, you should never have signed up for the card if you have not read the contract. That should be common sense but apparently a lot of people don't read them and see fit to yell at peon operators when they call in to dispute the changes. It's not the phone operators fault your credit limit was altered. I get tired of hearing the death threats towards me and my family. I have sympathy to a degree, but if AmEx customers would learn to read they would know their terms are subject to change at any time. I don't feel its appropriate to wish my family would die, as some of them do, so I don't particularly care anymore what happens to your card. Sometimes the change is unavoidable such as you filed for bankruptcy or you mortgaged your home out of necessity..that makes you a big risk and there is nothing you can do about it. Sometimes even though your typical credit score is very high, if your fico score drops down even a tenth, it has a huge impact on your limit. Does that give you a right to kill the messenger so to speak?

@Applekid: I haven't been there is a while and I thought it all died out by now. Why must this be on the consumerist? Can we get a banhammer out on nonamesleft or else a devideoing

@iamme99: All this discussion of the scores ignores pure profiteering. I have 2 cards with Chase that they bought up from other banks at various points over the past decade. One of them still has a balance based on their "fixed rate until the balance is paid off" offers, while the other has zero balance. Over the past month or so I've received changes in terms for each of the cards. The card that carries a balance has had the minimum payment increased to 5% of the balance, and states that the "principal factors we considered...include the APRs and revolving balances on your account." In other words, my interest rate is too generous and they can't change it, so they are forcing me to accelerate my payments so that they can charge higher interest on my future transactions. Fortunately, I was already paying close to 5%, since I don't like carrying a balance. But this was purely voluntary, now it's mandatory.

On the zero balance card, they are increasing the APR by increasing the margin over prime rate, and increasing the transaction fee for new balance transfers to 5%. The principal factors in this case are "maintaining profitability on your account." In other words, I'm not using it enough, but they want to make sure they profit if I ever do use it.

So these changes are simply gearing the terms of the account to maximize the profit based on my use profile on the individual accounts, not just the overall profitability score.

@wvFrugan:

Another check verification system is Certegy.

@bwcbwc: You can often revert to the original terms by "closing" the card except just for payoff. You usually have to snail mail a letter to a specific address declining the new terms and closing the card- don't forget to make copies and send it registered though...

@wvFrugan: All of this data mining should be banned *immediately* - I should not have to worry about my FICO score ruining my chance of getting a job or my insurance company denying me coverage because I had a particular prescription two years ago. This ridiculous amount of data mining is BS.

This is a way to stop giving credit to minorities and do other illegal activities. I also think the worst thing i have ever seen is auto insurance credit scoring, which has NOTHING to do with credit score OR your driving record. I asked what was involved in making that score, and it was told it was a proprietary system to make insurance rates more "fair". I told the agent, how about the fact I have no points, no claims, and always pay my insurance on time, and was told, it has nothing to do with it. Again another way to keep people in the dark and try raising rates.

Consumers do not need to know how lenders, credit card or otherwise, do business (read: scoring). It should not have any effect on your financial behavior. If you are declined for a loan, you're declined- does knowing your score make a difference? NO!

Monitor your credit report on a regular basis, but otherwise act like a responsible adult.

@NoNamesLeft:

Ahhhhhhhh hahahaha!

"Wal-Mart tracks each and every purchase..."

Sure. So does Costco. My mom got a letter in the mail today from Costco about the Nestle cookie dough recall. At the top, it said "According to our records, you recently purchased Nestle Toll House..."

Would you rather them not contact you?

Does anyone know if "hard pulls" affect FICO scores and by how much? A collection attorney did one on my credit report and they noted "collection" was the reason, even though it WASNT a collection. Anyone have any experience about whether this is a breach of FCRA? Thx

@rpm773: the shock & horror is a) consumers cannot neither obtain these scores nor keep clean of others' mistakes & malice b) credit has infiltrated EVERY decision-making process to include places it NEVER should've been allowed entry.

@bohemian: it's already being done.

and yes,

it needs to stop.

@tinyhands: wrong. those merchant only scores can be wrong and unlike the consumer scores cannot be monitored or challenged by the person those scores are being used against.