Banks' internal 'behavior scores' can decide cardholder terms

What you do with your cards is tracked, used to decide credit limts


Speaking of Credit
Speaking of Credit columnist Barry Paperno
Barry Paperno is a freelance writer and credit scoring expert with decades of consumer credit industry experience, serving as consumer affairs manager for FICO (formerly Fair Isaac Corp.) and consumer operations manager for Experian. He writes "Speaking of Credit," a weekly reader Q&A column about credit scoring and rebuilding credit, for His writings about credit scoring have appeared in The Huffington Post, MSN Money, CBS Money Watch and other consumer finance websites.
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Question for the expert

Dear Speaking of Credit,
I have had a student card for a few years and want to get a better card -- or have my current card's issuer bump up my credit limit from the current pitiful $500. If I ask my existing card issuer to increase my credit limit, will that result in a hard pull of my credit (and a loss of credit score points)? Or will they just judge me on my bill-paying behavior -- which is good -- and not pull my credit? -- Chevy

Answer for the expert

Dear Chevy,
When you apply to your existing card issuer for either a credit limit increase or a new card account, the processes are similar. With each, expect the usual request for updated application information, such as employment, income and bank accounts, and either a new "hard pull" credit report or a soft-pulled "account review" credit report the bank obtains periodically on existing customers. You might get both. So check with the issuer before you begin the process, especially if you're worried about your score. As you correctly note in your question, the hard pull will temporarily knock a few points off your credit score.

And since you're already the bank's customer, you can expect another decision-making factor to enter the picture. It's the banks own internal score that uses your bill-paying and charging history with the bank to predict future credit risk. That's called a "behavior score."

While credit bureau scores seem to get all of the attention in discussions about applying for credit, the less-known behavior score is also an important component in managing existing accounts and granting new or additional credit to a bank's customer. Used in conjunction with a credit bureau score, the behavior score helps determine credit limit increase amounts, as well as the marketing of additional products -- auto, mortgage and home equity loans, for example -- to current customers.

Behavior scores work a lot like credit bureau scores in that there is a numerical range within which higher scores typically indicate lower future risk. The major difference between the two types of scores is that instead of relying on credit bureau information that looks at the history of multiple credit relationships, as credit bureau scores do, behavior scores utilize a lender's own master file data to predict the future profitability of a customer under various credit limit, interest rate and product scenarios.

For the creditor, these two scores together can deliver a wider view of a customer's creditworthiness, with the credit bureau score providing the big picture and the behavior score a more focused look into the lender's own experience with that customer.

What a behavior score can include
Examples of the kinds of information evaluated by behavior scores include:

  • Payments. While the payment history category of a credit bureau score only considers whether you've made at least the minimum payment each month, a behavior score goes a step further by looking at each payment amount, which, when higher than the minimum, can add points to the score.
  • Balances. Whereas a credit bureau score only considers the most recently reported month's balance and credit limit information in balance-to-credit limit (credit utilization) calculations, a behavior score evaluates credit utilization over the entire history of an account.
  • Purchases. By looking the amounts of individual charges, the types of products and services purchased -- and even the types of businesses -- a behavior score provides a perspective completely absent in credit bureau scores. This part of the behavior score generated a congressional inquiry in 2009, as elected officials and regulators probed whether card issuers were using purchase data as the basis for increasing rates, reducing credit or even redlining. The report found relatively few cases where it was used punitively, and went no further.

Fortunately, since you say your payment record is good with your card company, your behavior score with them is likely to be a good one.

Unfortunately, you can't know your behavior scores, as they're not available to consumers. But you can know your credit bureau scores. The following are some steps you can take to familiarize yourself with the credit information that is available to you as you prepare to make a credit limit increase or new account request:

  • Check your FICO scores at all three bureaus: Equifax, Experian and TransUnion. Since lenders access credit scores from different credit bureaus, where the scores can vary according to the credit information each has on file, it's important to know your scores at all three bureaus.
  • If your FICO scores are sub-700, hold off on a new card request or limit increase request for now. While, thankfully, credit reports don't reflect denials of credit -- the most likely outcome if you have a low score -- simply having a new score pulled will add an additional inquiry to your credit report that could hurt your score for the next year.
  • If your FICO scores are above 700, call your card issuer to get a good idea of their lending requirements. In addition to good scores and income, your bank's limit increase and new card requirements may also include a minimum length of time since your card was first opened and/or a waiting period since the last limit increase was granted.

Only after you've taken some of these steps and familiarized yourself with some of the criteria card issuers use to extend additional credit to their existing customers should you actually pull the trigger on a new card or limit increase request. If you do make the move, good luck!

See related: CARD Act requires probe of card issuers' use of purchase data

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Published: July 2, 2015

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