Financial world's dirty little secret: Behavior scores

May 3, 2011 7:40:18 PM PDT
How would you feel if you found out someone was reading your credit card bill? And then telling others how much money you spend, and where you spend it? It's not a hypothetical question. In fact, it's a dirty little secret of the financial world.

You know about your credit score, but did you know you also have a behavior score? Credit card companies are judging you on where you shop, what you buy, and how you use your credit card.

Maybe you've been shopping recently at a discount store, perhaps you had a drink in a bar, or took time to see a marriage counselor -- all that could negatively impact your behavior score.

"It is an empirical fact that where you use your credit card does in fact tell a story about what type of risk you pose to the credit card issuer," said John Ulzheimer with

Before working at, Ulzheimer spent more than 12 years working for two credit reporting agencies. He says almost every large credit card issuer in the country uses behavior scores. The score is separate from your credit score and is never revealed to the consumer.

"Using your credit card in places like pawn shops, title lending, using them in places like marriage counselors, massage parlors, tire retreading shops, discount stores, that could indicate that you are in fact a higher credit risk," he said.

Behavior scores are used by credit card issuers to determine your interest rate, your credit limit, even whether you get to keep your credit card.

Shoppers 7 On Your Side talked to were surprised to hear about behavior scores. "I wasn't aware of that, but I think it's wrong," said Oakland resident Sylvia Stadmire. Another Oakland resident, Anne Van Wrinkle, found it "discriminatory." And San Jose resident Richard Ellis felt that it was horrible and that "You shouldn't be judged from where you shop at."

"If people cut back on their spending and try to behave in a way that's more responsible, that actually can count against them because that raises a red flag for some issuers that that may consider that financial distress," said Josh frank with the Center for Responsible Lending in Oakland.

The Federal Reserve in 2010 found that 35 million card holders in a single month were reviewed using behavior scoring. But a very small percentage of those were actually adversely hurt by their score -- just 1,900 saw a reduction in their credit line.

There are also other little known methods credit card issuers use to measure your credit worthiness. 7 On Your Side obtained a promotional flyer put out by Experian promoting its BankruptcyPredict score. The BankruptcyPredict forecasts the chances someone will file for bankruptcy. The score is not revealed to the card holder.

Experian declined an interview about its bankruptcy score, but Ulzheimer thinks the concept is a good one.

"If a credit card issuer shuts down my neighbor who's about to file bankruptcy, then they don't have to charge me a higher interest rate to subsidize that loss," said Ulzheimer.

Others say both behavior and bankruptcy scores adversely impact minority and low-income consumers.

"It can focus on groups indirectly in a way that arguably is illegal," said Frank.

FICO also declined an interview for this story.

Load Comments