Your Shopping Patterns Could Affect Your Credit

mmmpurses! · Jun 27th, 2008, 12:16 AM

Are Creditors Eyeing Your Purchases?
By JESSICA SILVER-GREENBERG,BusinessWeek
Posted: 2008-06-25 18:01:08

Most borrowers know a late payment or high outstanding balance can hurt their credit. But what about frequenting a massage parlor, retreading a tire, or visiting a marriage counselor? Such activities count, too, according to a suit filed by the Federal Trade Commission in federal court in Atlanta on June 10 against card issuer CompuCredit.

Lenders, insurers, and other financial firms use credit scoring systems to make a host of decisions about consumers, including the interest rate on their mortgages, the limits on their credit cards, and the monthly premiums for their auto coverage. Some rely heavily on FICO, a three-digit score developed by Minneapolis-based financial firm Fair Isaac, while others use proprietary models developed by statisticians.

But companies don't disclose what's baked into their formulas, leaving many borrowers to wonder which factors determine their financial fate. The FTC suit against Atlanta-based CompuCredit for allegedly "deceptive" marketing practices offers a rare look inside the opaque business of credit scoring. It reveals a mechanism that consumer advocates and politicians have long suspected exists -- one in which purchasing behavior, not just payment history, matters.

The allegations, in part, focus on CompuCredit's Aspire Visa, a subprime credit card for risky borrowers. The FTC claims that CompuCredit didn't properly disclose that it monitored spending and cut credit lines if consumers used their cards at certain places. Among them: tire and retreading shops, massage parlors, bars, billiard halls, and marriage counseling offices.

"The company touted that cardholders could use their credit cards anywhere," says J. Reilly Dolan, assistant director for financial practices at the FTC. "What they didn't say was that you could be punished for specific kinds of purchases." The Federal Deposit Insurance Corp. is also seeking $200 million in penalties from CompuCredit in the matter.
It's not the first time CompuCredit has come under scrutiny from authorities. In 2006, the credit card issuer and another financial firm agreed to fork over $11 million to consumers and reform its marketing and billing procedures as part of a settlement with then-New York Attorney General Eliot Spitzer, who had launched a probe the year before after receiving various consumer complaints.

CompuCredit maintains that the FTC's lawsuit is without merit, and defends its practices. "Every time a consumer accesses their credit, a new decision to extend a loan is being made," says Rohit H. Kirpalani, CompuCredit's general counsel. "These scoring models are commonplace across the industry."

Gaming the System

With competition increasing, databases improving, and technology advancing, companies can include more factors than ever in their models. And industry experts say financial firms increasingly are looking at consumer behavior, as CompuCredit did.

The worry is that companies may tweak the credit scoring systems in unfair or biased ways, weeding out or limiting borrowers based on race, gender, or sexual orientation. (In the case of CompuCredit, regulators are taking issue with the lack of disclosure, not specifically its use of behavior-based scoring.)

"We as consumers should become aware that behavior is used to determine our creditworthiness," says consumer advocate Karen Gross, president of Southern Vermont College. "What CompuCredit portends is the [use] of information to create a more robust and potentially nefarious credit scoring system."

http://money.aol.com/news/articles/c...173x1200183825

mmmpurses! · Jun 27th, 2008, 12:23 AM

The story was also on FoxNews...
http://www.yahoo.com/s/905200

or try

http://cosmos.bcst.yahoo.com/up/play...26713&src=news

Interesting story, I hope you can see it!!

I am wondering if our bag purchases would be a good or a bad. Hmmm....

Zophie · Jun 27th, 2008, 02:06 AM

watch out, big brother is watching you....

~Fabulousity~ · Jun 27th, 2008, 09:18 AM

^^^pretty much!

socalgem · Jun 27th, 2008, 10:20 AM

Now that is funny, a subprime company caring about the spending patterns of the ones they grant credit to.

leothelnss · Jun 27th, 2008, 11:51 AM

Soo, I'm in trouble for playing billiards and DH is in trouble for buying drinks... Ohhkaay

BagsRmyLife · Jun 27th, 2008, 12:37 PM

Getting a massage??? That's ridiculous.

guccimamma · Jun 27th, 2008, 12:44 PM

guess i shouldn't buy drugs with my credit card. (kidding)

Jahpson · Jun 27th, 2008, 12:46 PM

To hell with that! they can monitor until the cows come home. Im not using my credit card for anything but emergencies.

now my debit card...no worries in that.

caxe · Jun 27th, 2008, 01:17 PM

The crooked credit industry sucks. It's completely loathsome, unregulated, decentralized, and suspect. This doesn't surprise me in the least. I'm sure they're doing much worse to the consumer that we don't hear about.

The bad thing about it is that it's going to get worse, and as the article somewhat predicts, practices are going to become increasingly more discriminatory and biased. Just watch.

socalgem · Jun 27th, 2008, 01:28 PM

They aren't referring to therapeutic massages.

Quote:

Originally Posted by BagsRmyLife

Getting a massage??? That's ridiculous.

titania029 · Jun 27th, 2008, 01:36 PM

Quote:

Originally Posted by socalgem

They aren't referring to therapeutic massages.

I was confused by that one too. How would they be able to tell though?

UK2ME · Jun 27th, 2008, 01:41 PM

Just another good reason not to use a credit card....

socalgem · Jun 27th, 2008, 02:11 PM

titania029 - Normally MPs have names that would probably identify them as something other than thera massage. And if the company knows which is which, they can figure it out. Or they can just do research on the company.

UK2ME - I disagree with not using credit cards at all.

UK2ME · Jun 27th, 2008, 03:52 PM

Quote:

Originally Posted by socalgem

UK2ME - I disagree with not using credit cards at all.

Because of the need to build credit in order to buy a house or car in the future?

I don't know. People got by for many many years without credit cards back in the days when you actually had to have an income to get credit. I don't want my credit card company deciding my credit rating based on whether I shop in Goodwill or Hermes, or that I am a better risk because I have a gym membership, or that my credit should be extended because I've spent $X at Ford in the last month and therefore I might go out and buy a new car. I just don't like it, personally.

Jun 27th, 2008, 12:16 AM	#1
mmmpurses! Member Joined: Aug 2007 Posts: 1,433	Are Creditors Eyeing Your Purchases? By JESSICA SILVER-GREENBERG,BusinessWeek Posted: 2008-06-25 18:01:08 Most borrowers know a late payment or high outstanding balance can hurt their credit. But what about frequenting a massage parlor, retreading a tire, or visiting a marriage counselor? Such activities count, too, according to a suit filed by the Federal Trade Commission in federal court in Atlanta on June 10 against card issuer CompuCredit. Lenders, insurers, and other financial firms use credit scoring systems to make a host of decisions about consumers, including the interest rate on their mortgages, the limits on their credit cards, and the monthly premiums for their auto coverage. Some rely heavily on FICO, a three-digit score developed by Minneapolis-based financial firm Fair Isaac, while others use proprietary models developed by statisticians. But companies don't disclose what's baked into their formulas, leaving many borrowers to wonder which factors determine their financial fate. The FTC suit against Atlanta-based CompuCredit for allegedly "deceptive" marketing practices offers a rare look inside the opaque business of credit scoring. It reveals a mechanism that consumer advocates and politicians have long suspected exists -- one in which purchasing behavior, not just payment history, matters. The allegations, in part, focus on CompuCredit's Aspire Visa, a subprime credit card for risky borrowers. The FTC claims that CompuCredit didn't properly disclose that it monitored spending and cut credit lines if consumers used their cards at certain places. Among them: tire and retreading shops, massage parlors, bars, billiard halls, and marriage counseling offices. "The company touted that cardholders could use their credit cards anywhere," says J. Reilly Dolan, assistant director for financial practices at the FTC. "What they didn't say was that you could be punished for specific kinds of purchases." The Federal Deposit Insurance Corp. is also seeking $200 million in penalties from CompuCredit in the matter. It's not the first time CompuCredit has come under scrutiny from authorities. In 2006, the credit card issuer and another financial firm agreed to fork over $11 million to consumers and reform its marketing and billing procedures as part of a settlement with then-New York Attorney General Eliot Spitzer, who had launched a probe the year before after receiving various consumer complaints. CompuCredit maintains that the FTC's lawsuit is without merit, and defends its practices. "Every time a consumer accesses their credit, a new decision to extend a loan is being made," says Rohit H. Kirpalani, CompuCredit's general counsel. "These scoring models are commonplace across the industry." Gaming the System With competition increasing, databases improving, and technology advancing, companies can include more factors than ever in their models. And industry experts say financial firms increasingly are looking at consumer behavior, as CompuCredit did. The worry is that companies may tweak the credit scoring systems in unfair or biased ways, weeding out or limiting borrowers based on race, gender, or sexual orientation. (In the case of CompuCredit, regulators are taking issue with the lack of disclosure, not specifically its use of behavior-based scoring.) "We as consumers should become aware that behavior is used to determine our creditworthiness," says consumer advocate Karen Gross, president of Southern Vermont College. "What CompuCredit portends is the [use] of information to create a more robust and potentially nefarious credit scoring system." http://money.aol.com/news/articles/c...173x1200183825 __________________ I can't be good all the time.

Jun 27th, 2008, 12:23 AM	#2
mmmpurses! Member Joined: Aug 2007 Posts: 1,433	The story was also on FoxNews... http://www.yahoo.com/s/905200 or try http://cosmos.bcst.yahoo.com/up/play...26713&src=news Interesting story, I hope you can see it!! I am wondering if our bag purchases would be a good or a bad. Hmmm.... __________________ I can't be good all the time.

Jun 27th, 2008, 02:06 AM	#3
Zophie I <3 my Maltese! Joined: Feb 2007 Location: New Orleans, LA Posts: 6,575	watch out, big brother is watching you.... __________________

Jun 27th, 2008, 09:18 AM	#4
~Fabulousity~ Yes we can! Joined: Jan 2006 Location: Creating my life... Posts: 4,818	^^^pretty much! __________________ Every adversity, every failure, and every heartache carries with it the seed of an equal or greater benefit - Napoleon Hill

Jun 27th, 2008, 10:20 AM	#5
socalgem Because I can... Joined: Apr 2007 Location: California Posts: 4,386	Now that is funny, a subprime company caring about the spending patterns of the ones they grant credit to. __________________ Life is too short to drink cheap champagne.

Jun 27th, 2008, 11:51 AM	#6
leothelnss Loves sales... Joined: Jan 2008 Location: Burtonsville, MD Posts: 1,751	Soo, I'm in trouble for playing billiards and DH is in trouble for buying drinks... Ohhkaay __________________ I have a nice collection (finally) So I guess it's time for me to get picky & have a wishlist... 1. Hayden Harnett Havana Hobo 2. Carrie Valentine Confidence Clutch 3. Linea Pelle Angie 4. Kale Tate 5. Rebecca Minkoff Morning After

Jun 27th, 2008, 12:37 PM	#7
BagsRmyLife Member Joined: Mar 2007 Location: - NyC - Posts: 3,461	Getting a massage??? That's ridiculous.

Jun 27th, 2008, 12:44 PM	#8
guccimamma guccimamma Joined: Aug 2006 Posts: 2,671	guess i shouldn't buy drugs with my credit card. (kidding)

Jun 27th, 2008, 12:46 PM	#9
Jahpson I'mma Do Me......... Joined: Aug 2007 Location: The Playground Posts: 8,871	To hell with that! they can monitor until the cows come home. Im not using my credit card for anything but emergencies. now my debit card...no worries in that.

Jun 27th, 2008, 01:17 PM	#10
caxe I'm the pappy! Joined: Mar 2007 Location: The Southeast, US Posts: 3,295	The crooked credit industry sucks. It's completely loathsome, unregulated, decentralized, and suspect. This doesn't surprise me in the least. I'm sure they're doing much worse to the consumer that we don't hear about. The bad thing about it is that it's going to get worse, and as the article somewhat predicts, practices are going to become increasingly more discriminatory and biased. Just watch. __________________ RIP Bernie Mac RIP Isaac Hayes

Jun 27th, 2008, 01:41 PM	#13
UK2ME Go on, I dare ya! Joined: Mar 2008 Location: Maine Posts: 474	Just another good reason not to use a credit card.... __________________ *Wear clean knickers!* (As my mother always told me, you just never know when you'll be run over by a bus.)

Jun 27th, 2008, 02:11 PM	#14
socalgem Because I can... Joined: Apr 2007 Location: California Posts: 4,386	titania029 - Normally MPs have names that would probably identify them as something other than thera massage. And if the company knows which is which, they can figure it out. Or they can just do research on the company. UK2ME - I disagree with not using credit cards at all. __________________ Life is too short to drink cheap champagne.