I just ran across an interesting article by Liz Pulliam Weston detailing the various scores that lenders use to determine who gets what sort of offer.
In addition to the well known “FICO” credit score, credit issuers apparently keep track of the following eight metrics…
Response score: An estimate of the likelihood that you’ll respond to things such as a new balance transfer credit card offer. This helps them determine whom to target and how often.
Application score: This score includes information that’s on your application, but is not already factored into your FICO score. This includes things like time at current employer, salary, etc. This score is used to determine whether or not to open the account, and how high of limit to offer to you.
Bankruptcy score: Standard credit score are designed to predict the likelihood that you’ll miss a payment in the next couple of years. Bankruptcy scores, which range from 1 to 300 (higher is better), predict the likelihood that you’ll just give up on debt repayment and file bankruptcy. Unfortunately, Weston’s article didn’t go into detail on the sorts of things that go into your bankruptcy score.
Revenue score: This score predicts the likely profitability of an account. Here again, the article didn’t detail how it’s determined, but… I would imagine that creditors with which you’ve done business in the past will factor in things like whether or not you typically carried a balance, how much you’ve paid in late fees, etc.
Attrition-risk score: This score reflects the likelihood that a customer will stop using a card. If you are a profitable customer with low bankruptcy risk, this score can influence the likelihood that you’ll be offered a carrot to stay with the company — perhaps a high credit limit or a lower interest rate. If you’re not very profitable and/or viewed as a credit risk, on the other hand, don’t expect them to work very hard to keep you.
Behavior score: This scores looks at your payment behavior and factors in things like whether or not you pay your bills in full every month, occasionally carry a balance, or persistently pay on the minimum amount due. This score, which comes from internal creditor databases, can be used to predict whether a missed payment is an aberration or a sign of impending doom.
Transaction score: This score is used to determine whether or not a given transaction fits your typical spending pattern, and thus whether or not it’s potentially fraudulent. While I’m whole-heartedly in favor of fraud prevention, methinks that Citibank needs to fine-tune their transaction scoring system such that we don’t get stopped from doing things like making charitable donations.
Collection score: Collections agencies use collections scores to predict whether or not they’ll be able to get any money out of you, and they rank their list of debtors accordingly. If your score is low and the amoutn involved is small, they’ll make less of an effort to track you down. Hmmm… I wonder what our collection score is right now?
All in all, I’d have to say that we have a pretty boring credit score. We pay our bills on time, never carry a balance, and have been relatively stable, long-term customers on most of our credit cards. We’re not overly profitable in that we don’t pay finance charges, but… We’re very low risk, and we charge most of our monthly purchases, so we’re a constant source of merchant transaction fees.
9 Responses to “Your Secret Credit Scores”
Its like you read my mind! You appear to know a lot about this, like you wrote the book in it
or something. I think that you can do with some pics to drive the message home a bit, but instead of that, this is magnificent blog.
A great read. I’ll certainly be back.
Point of information:
I just googled “bankruptcy score” and found a bankrate.com article which says you want a LOW bankruptcy score, not a high one. So I think lower is better in this case.
I have a very low income and a very hungry creditor leaning heavily on me. I’m sure I have a very low bankruptcy score. Can I use this to my advantage in getting the creditor to calm down some?
I work for a financial institution, and this post sums it up pretty well. It’s not just credit card companies, check out the book “Super Crunchers”.
You know, I still haven’t gotten around to purchasing any of my FICO scores yet… I know I have good credit since there’s nothing bad on my report, but it’s $45 to buy all three of them from MyFico…no thanks!
Makes you wonder what other information they keep on you to evaluate your worth. When I worked for one of the major cell phone carriers they had a system for determining customer worth and it determined how good of a plan you could offer them to renew their contract.
I figured financial institutions evaluate you on things like bankruptcy, behavior, collection, but, response and attrition scores? I never knew they helped determine credit card offers. Very interesting article.
Revenue score –
Maybe that’s why I never get credit card offers from the banks that I have credit cards with since I always pay my balance and never do cash advances so there is no revenue for them!
This writer covers some good issues. Another relevant article she has is here.
In this article, she talks about how credit card companies will give consumers different interest rates based on their credit review. The problem for many consumers is that they assume having a high credit score automatically guarantees them the best rates offered. Clearly, there’s a lot more going on.