Uncovering hidden credit scores |
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 How is that different from the FICO scores that
consumers can get?
 The one that consumers can get is just the
general-use FICO score, so kind of the vanilla version of the FICO score. There is nowhere that a consumer can get the bank-card version. It's
not for sale anywhere -- myFICO, or at any of the bureaus. It's simply not a product that's sold to consumers. Really the only difference
between that score and the general FICO score is that it modifies what your score would be based on -- expected performance with a bank card.
It's kind of like a semi-customized model.
Would there be a huge difference between the
two scores?
Not huge -- when I think huge, I think 100,
200 points. You're likely to see the score be within plus or minus 20, 30 points. It's not a colossal difference, but it is a difference.
Using the credit card
Now we've just processed this application that was mailed back to us. We've used a score to set the final terms and now we've mailed the card
to the consumer. The consumer calls in and activates the card and goes to a merchant and uses it for the first time. The transaction is scored.
The score is, in many cases, used to determine whether or not the issuer wants to approve the transaction. In other words, is Leslie McFadden
trying to buy a $5,000 television using a credit card with a $1,000 credit limit? Well, they're going to decline that transaction because you
failed their criteria.
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| A look at risk scores |
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Also, if you have a typical pattern of your usage of the card and then all of a sudden you do something atypical, sometimes
you'll get a phone call from their fraud department trying to verify that you are in fact buying $5,000 worth of diamonds with your card.
You've gotten those calls -- I think we all have. That's the result of a fraud score.
So, now that you're an existing cardholder and you're using it, you're either revolving a balance month over month or you're
paying in full. Every single month that you have the card, the credit card issuer is calculating what's called a behavior score. A behavior
score calculates just the activity on that one card, not anything else that has to do with your credit. What they're doing there is essentially
taking your temperature on a month-to-month basis to determine, is Leslie McFadden's risk changing? Do we need to modify the terms of her account?
Or do we just need to let her be? Is there something we can do to entice (her to) use the card more? Because remember, they're trying to make you
into a profitable customer using all means necessary to do so.
A behavior score can also be used when it comes time to reissue the card. Do they want to give Leslie a credit limit increase? Do
they want to give her a credit limit decrease or do they even want to reissue the card? Do they want to reissue the card and start sending you
convenience checks or balance transfer checks? They use that behavior score for a variety of purposes, but specific to just that one card.
Negative cardholder behavior
Now, let's say Leslie's had the card for a year and she's never used it, so now she's not really generating any revenue, then they'll use a tool
called an attrition score. They'll score your credit report with this attrition score. What they're trying to find out here is, is Leslie ever
going to use the card? Have we been a victim of attrition, meaning that she's chosen to use another card in lieu of ours? If so, do we want to
take aggressive means to try to get Leslie back as a customer? Or do we want to just choose to let her off in another direction and essentially
choose to lose her?
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