Behavior scores aren’t just for grammar school children any more. In fact, if you have ever used a credit card, there’s a behavior score on you somewhere. There’s also a fraud score, based on the same information.
You may have been thankful when you got a call from a credit card issuer asking if you were the one to make a recent purchase. And that’s good – if a thief steals your credit card and tries to buy a new stereo system for several thousand dollars, you want him stopped.
The reason they called is because the purchase was not consistent with your usual credit card use, and that sent up a red flag. That means that your credit card companies are watching what you spend from month to month. The fraud score alerts them that buying expensive electronic equipment is not your normal behavior.
Behavior scores are calculated to evaluate the risk you pose to the credit card issuer.
If you go along from month to month, paying each balance in full, that becomes your normal behavior. If you suddenly start carrying a balance, and that balance starts growing as you begin paying only the minimum each month, your card issuer begins to wonder what’s going on in your life.
Further, if you use your card primarily for purchases at upscale boutiques, concert halls, and night clubs, that becomes your norm. If you suddenly begin buying clothing at Wal Mart or charging groceries, it sends up a big red flag.
That change in behavior could signal a change in circumstances, such as a job loss that could eventually render you unable to make your payments.
What will the card issuer do about it? In most cases, your credit limit will be decreased and your interest rate will increase. That means your minimum payment will also increase, so if you’ve been having a hard time and the payment is difficult to meet, you’ll now have a larger payment.
Your card issuer will also look at your behavior scores to decide if they want to reissue the card when it expires. If your behavior has changed drastically, they may decide that they don’t want to extend any more credit to you.
On the other hand, if you’re a good risk but aren’t generating profit, they’ll use your behavior scores to decide if they should drop your account or do something to encourage more use. Then you could begin receiving notices of a credit line increase, promotional interest rates, and convenience checks.
Author:Marte Cliff
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news.
