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You’ve heard it time and time again, don’t be late on your credit card payments or you’ll end up with a poor credit score. It’s probably the most sure-fire way to lower your score, but did you know making regular payments and keeping a low balance are just a few of all the factors that go into determining your credit score? According to a recent suit filed by the Federal Trade Commission, personal activities and your lifestyle play an important role as well. For years companies have kept their credit score formulas hush-hush, but the FTC’s suit brought a couple of long suspected factors to light.
What Activities or Places could Affect Your Score?
The suit filed by the Federal Trade Commission is against a credit card issuer based out of Atlanta called CompuCredit and on the basis of deceptive marketing. CompuCredit originally led customers to believe they could use the company’s credit cards anywhere, but were actually monitoring spending habits and cut credit lines if the cards were used in certain places. Here’s some of the places or activities that caused customers to get cut off and a few others that many people believe could also apply:
- Bars or billiard halls
- Marriage counseling
- Massage parlors
- Frequent changes in employment
- Moving to different states
While you may not agree with what CompuCredit is doing with their credit card holders, their behavior-based monitoring isn’t actually illegal or even the issue at hand with the FTC. Their suit is concerned with CompuCredit’s lack of disclosure, not their monitoring of spending habits. However, financial experts are worried that this is only the beginning of behavior-based scoring and that it could soon play a larger role in credit scores. With credit companies growing larger and technology continuing to evolve, they can include an ever increasing amount of factors in determining credit scores. There’s concern that using lifestyle as a determinant could ultimately lead to companies limiting or outright denying credit to consumers based on race, sexual orientation, or gender. Is it fair to lower the scores of an entire race simply because research indicates that its population is more likely to have debt? Many people would have an issue with that and it could potentially become an explosive problem among consumers and credit companies
Additional Resources
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