Other Ways Lenders ‘Score’ Consumers
Credit scores aren’t the only thing lenders and creditors use…
Lenders track consumer’s spending habits through credit scores - allowing them to estimate how much of a risk, or how profitable they will be as potential customers. Although credit scores are the primary way financial institutions evaluate new applicants, you may be surprised to learn there are a variety of other tools they use as well. Here are some other ways you may be evaluated when applying for a loan or credit card:
- Response Score - predicts whether you will respond to a new credit card application or balance transfer offer. This score is used to decide who will be targeted and how to customize offers to appeal to particular consumers.
- Application Score - used with other scores to determine approval status, the rate that will apply and the credit limit. This score includes data not included in your credit score such as your income, address and current and past employers.
- Bankruptcy Score - predicts the chance that you will file for Chapter 7 or Chapter 13 bankruptcy. Your Bankruptcy Navigator Index (BNI) range is from 1 to 300. The higher the score, the lower the predicted risk. The bankruptcy score is used along with your credit score to assess the risk that you won’t pay.
- Revenue Score - predicts how much money your accounts will generate for the lender.
- Attrition Risk Score - the odds that a user will stop using their card. Typically, your attrition risk score is used in combination with other scores to determine the risk of a consumer defaulting on the account. For example, if your account generates a lot of revenue and is deemed low-risk for default the issuer might aggressively try to keep your business by jacking up your credit limit, lowering your rate. If your account isn’t that profitable or is deemed risky, on the other hand, the issuer might just let you go.
- Behavior Score - A examination of a single account from a lenders database. This score is calculated to describe how the consumer is handling their account. Is there an overdue payment or a sign of impending financial trouble?
- Transaction Score - Each time you use your credit card, the transaction is examined for signs of possible fraud and to determine if it should be approved.
- Collection Score - When an account has been turned over to a collection agency, the likelihood of the consumer paying the debt is assessed. Collection agencies watch for all kinds of evidence that your financial situation may be improving.
Lenders use more than one type of score to determine your level of risk and their methods can be quite sophisticated. For example, the Triad Transaction Score created by Fair Isaac considers attrition, potential revenue and patterns in credit use behavior to determine high or low level risk. How they actually use the scores depends on individual company policies.
* Want to know your credit score? Go to: Credit Reports / Scores >
