Credit Score Scandal

John – I know you won't respond to this. I saw you on FOX News Monday talking about how WHERE I use my credit card will lower my credit scores. First off, what business is it of yours or anyone else's where I use my credit card? Second, thanks for never talking about this on your website and then blindsiding us with this on national television.

Ticked Off in Tallahassee, FL

Ticked Off – Whoa, that's the first email I've had to edit for use in our Tidbits or GetCreditWise newsletters. Now that's what I like to see.a little emotion out of our readers. Let's just say that you are not the only person who is furious about this. Let's address the topic and see if we can fix that blown gasket of yours. You can watch the full FOX segment here.

T.O. is referring to some information that became public in the wake of a lawsuit against CompuCredit, a subprime credit card company based in Atlanta. According to a BusinessWeek article that was published on June 19th, CompuCredit allegedly penalizes their customers for using their CompuCredit credit card (the Aspire Visa) at various types of establishments. The examples cited in the article are tire companies, massage parlors, bars, pool halls, and marriage counselors.

Needless to say, this news has set off T.O. and a lot of other people. And it's partially my fault for not addressing the use of this data in the past; for that I apologize and I will try to do better in the future. Here's some clarity and additional context on the subject that will be useful to you:

1. Where you use your credit cards does NOT affect the FICO® credit scores that everyone is familiar with. In fact, these scores are not credit bureau scores at all (based on credit bureau data). These scores are referred to as behavior scores, which look at your usage of just one credit card. So relax... where you use your credit card is NOT hurting your FICO® credit scores.
2. The data being monitored and evaluated is called psychographic data. This is lifestyle or tendency data. Your credit card usage patterns and where you use your cards is important to the banks that issue them. It paints a picture about your credit risk.
3. This is NOT something new. Psychographic data has been used for a very long time. Have you ever gotten a phone call from XYZ Bank's fraud department wanting to know if you were the one who charged $2,500 in shoes at Macy's? That call was based on a change in your shopping pattern. Creditors also use this information for marketing purposes. Think about it... if you use your credit card at the gas station a lot, wouldn't it be a good idea to market the new gas rewards card to you?
4. Here's the bad news... there's nothing you can do about a credit card company watching where you use your cards. All credit card issuers of any size capture, monitor, and then use this information. So the answer to T.O.'s question about what rights he has isn't one that he's going to like. It's not a matter of your rights... it's completely legal to capture this data and use it. CompuCredit is in trouble because of allegedly "deceptive" marketing practices.

So here's what I suggest you do....

Don't worry about it. Continue paying your bills on time, use your credit responsibly and you won't have any issues. Remember, CompuCredit is a subprime credit card company. That means that their customers are already high risk. It also means that all of their customers' creditors are already watching what they do very closely. In order for you or anyone to lessen the importance of the lifestyle data that CompuCredit relied on, you would have to become a low risk borrower.

As always, if you have any questions or comments please feel free to drop me a line at AskJohn@credit.com.

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