The secret is out on behavior credit scoring

FRESNO, Calif.

It's called behavior scoring.

Action News Anchor Graciela Moreno shows us how credit card companies are judging you on where you shop, and what you buy.

Maybe you've shopped recently at a discount store. Perhaps you had a drink in a bar, or took time to see a marriage counselor. All that could negatively impact your behavior score.

John Ulzheimer: "It is an empirical fact that where you use your credit card does in fact tell a story on what type of risk you pose to the credit card issuer."

John Ulzheimer is with smartcredit.com. Before that, he spent more than 12 years working for two credit reporting agencies. He says almost every large credit card issuer in the country uses behavior scores. The score is separate from your credit score and is never revealed to the consumer.

John Ulzheimer: "Using your credit card in places like pawn shops, title lending, using them in places like marriage counselors, massage parlors, tire retreading shops, discount stores, that could indicate that you are in fact a higher credit risk."

Behavior scores are used by credit card issuers to determine your interest rate, your credit limit, even whether you get to keep your credit card. Shoppers we talked to were surprised to hear about behavior scores.

Carmen Aguilar: "Are they trying to assume that because we're going to a discount place that we have less qualities on our credit or why?"

Rigo Contreras: "I don't think it's right and I don't think they should be using that, its wrong, and its discrimination of you ask me."

Kim Wilson: "If I ever go out to apply for another job a credit card... It's going to be in the back of my mind now."

Josh Frank is with the Center for Responsible Lending in Oakland.

John Frank: "If people cut back on their spending and try to behave in a way that's more responsible, that actually can count against them, because that raises a red flag for some issuers that that may consider that financial distress."

The federal reserve in 2010 found that 35 million card holders in a single month were reviewed using behavior scoring. But a very small percentage of those were adversely hurt by their score, just 19-hundred saw a reduction in their credit line. There are also other little known methods credit card issuers use to measure your credit worthiness.

A promotional flyer put out by Experian promoting its bankruptcy predict score. The "bankruptcy predict" forecasts the chances someone will file for bankruptcy. The score is not revealed to the card holder. Experian declined an interview about its bankruptcy score, but John Ulzheimer of smartcredit.com thinks the concept is a good one.

John Ulzheimer: "If a credit card issuer shuts down my neighbor who's about to file bankruptcy, then they don't have to charge me a higher interest rate to subsidize that lost."

Others say both behavior and bankruptcy scores adversely impact minority and low income consumers.

Josh Frank: "It can focus on groups indirectly in a way that's arguably illegal."

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