NEW Credit Slips articles...

[Joanne98]

Bankruptcy Risk Scores

People talk a lot about credit scores as if there is some magic number hanging over your head and that number is following you everywhere. Isn't there maybe even some commercial like that? Like many things, the perception about credit scores is generally correct but often wrong in the specifics. It is generally correct in that the credit score does follow you just about everywhere. One way, however, that the perception is incorrect in the specifics is that there is nothing magical about the particular scoring system that is used. It's all about the algorithm the credit scoring company uses.

http://www.creditslips.org/creditslips/2009/01/bankruptcy-risk-scores.html

It's Not You, It's Where You Shop

A lot of stories had been circulating on the Internets and through the Google that consumers were getting hit with lower borrowing limits on the credit cards. Sometimes, they received notice the limit was lowered, and sometimes they found out only when they went to go use the card. American Express was often mentioned. A story is up at the New York Times web that delves into the mysteries of this practice. It helps answer a lot of the questions about what the heck was going on. Cutting through the rhetoric, I understand American Express to be admitting that they were cutting credit scores based on where you shopped. Sure, it was not all done on where you shopped, but it appears that was an important component. As the NYT article suggests, we know American Express was doing it--they say they have stopped--but who else is doing it?

http://www.creditslips.org/creditslips/2009/01/its-not-you-its-where-you-shop.html

Here Is Your Interest Rate, Except When It Isn't

Credit card companies often make you promises with fine print that nullifies the promise. The Simpsons episodes (maybe the best . . . . show . . . . ever) often will include an advertisement promising some great product with a voiceover that says something like "There is no promise the actual product will be as advertised. Too bad that only one of those is a gag.

A Credit Slips reader e-mailed with a story of how Chase had just decided to change his interest rate from a 3.99% APR to his choice of a 7.99% APR or a $10 monthly service charge and 5% of the minimum balance. This person had a great credit score, no missed payments or job loss, and the loan balance was modest (only about $1,700). Still, Chase had decided it was going to change the deal.

http://www.creditslips.org/creditslips/2009/01/here-is-your-interest-rate-except-when-it-isnt.html

Big Brother Is Looking After You

The NYTimes has a story about how American Express is analyzing where its cardholders are making purchases and using that information to determine whether to likely to default and adjusting credit limits and rates accordingly.

This sort of behaviorally-based pricing is nothing new in the card industry. We've seen a form of this for quite a while in the form of cross-default clauses and their successor any-time/any-reason term change clauses. It's also popped up in litigation. For example, the FTC's complaint against CompuCredit for unfair and deceptive acts and practices (settled for $350 million and a consent decree). FTC alleged that CompuCredit was changing terms on cardholders depending on whether they used their card for things like marriage counseling, tire retreading, or massage parlors. The NYTimes story indicates that Amex is not just analyzing on-us transactions, but also looking at things like home prices in your area and your mortgage lender.

http://www.creditslips.org/creditslips/2009/01/big-brother-is-looking-after-you.html

[myrna minx]

1. Thank you for these links. I was just discussing these very topics with a friend yesterday.

K&R.

[ima_sinnic]

2. I second the appreciation for the links--very relevant to my life right now

as I try (despite the economy) to raise a credit score that was damaged by hard times 3 years ago.

[Joanne98]

3. Happy to be helpful!

:hi:

[Old Codger]

4. Chase

They are hurriedly raising a lot of peoples interest well in advance of the deadline, I have excellent credit, I had 3 chase cards, one high limit business card, one personal card that I actually applied for and one that another company sold to them. In the last week they have attempted to raise the rate by 7 percent on all of them, I refused the rate increase and closed all accounts.. Thanks to our wonderful representatives they had enough warning to protect themselves (sic).