Behavioral Scoring/Financial Profiling May Lower Your Credit Score

Credit card companies and a new financial profiling tactic called behavioral scoring may lower your credit line – and eventually, your credit score – as a result of the financial actions of others. A recent report states that companies have always judged you by your own financial actions, but now, in addition to stricter guidelines, the credit mistakes of others might have negative affects on your credit.

Behavioral scoring analyzes the behavioral patterns of consumers to determine credit risk – and if they’re viewed as a risk, credit card companies may choose to lower their credit lines. Here are a few items that credit card companies may use to profile you as a risk:

  • Watch what you purchase. One characteristic of behavioral scoring is that banks are looking at the items and services you purchase and deciding on their own whether they are appropriate. If they determine that they’re not appropriate, or show you may be in financial distress, you may be viewed as a credit risk.
  • Watch where you shop. Another characteristic is if customers shopping in the same stores as you have poor repayment histories, you may be punished as well – sort of a “birds of a feather” assumption.

Unfortunately, having your credit line lowered as a result of behavioral scoring can have long-term repercussions. If your line is reduced, this affects the ratio between your available and in-use credit, which can lower your FICO score.

But what’s worse about this practice is that individuals don’t know when and how they’re being judged. So to become more informed, it’s good to contact your credit card company and conduct additional research on this practice to avoid your consumer behaviors, as well as others’, having long-term affects on your credit and your life. One way to protect yourself is to enroll in a credit monitoring program offered by companies such as Go Free Credit. It can go a long way in protecting you and your credit by notifying you the instant there is a change on your report.

How do you feel about this practice being employed by credit card companies?