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Too much fast food can be hazardous to your credit

It won't impact your score, but it could make issuers think you're a risk

By Karen Price Mueller

Opening Credits
Columnist Karin Price Mueller
Karin Price Mueller is an award-winning writer with a specialty in personal finance.

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Question for the CreditCards.com expert

Dear Opening Credits,
Is it true that if I use my credit card at fast food places, my credit score will decrease or that it will affect my score in some way because it looks like I cannot afford to buy food? I pay my bill in full every month. -- Burger and Fries Lover

Answer for the CreditCards.com expert

Dear Burger,
The fast answer is no, where you eat doesn't have an impact on your credit score, but that's not the full story. Your credit score is just one of the many factors that issuers use when making lending decisions, and while paying plastic for that Big Mac won't hurt your credit score, it might raise issuers' eyebrows for just the reason that you described.

Historically, consumers have turned to fast food in tough economic times, and these times are no different: The National Restaurant Association expects a 4 percent increase in sales at fast food restaurants in 2009. The fare is often belly-warming, feel-good and inexpensive. One fast food meal can cost between $5 and $7 or so, cheaper than other, more high-brow dining options.

As the economy struggles, eating at these restaurants can make good economic sense, and while eating there won't do much damage to your bank account, it won't lower your credit score either. 

"That doesn't affect your credit score," says Susan Thomas of the credit bureau Experian. "There are a lot of factors that make up your credit score, and whether or not you use your card at McDonald's doesn't affect it by any means."

The key to your credit score is how you pay your bills, not where you shop. Steven Katz, director of consumer education for TrueCredit.com, a division of the credit bureau TransUnion, says you should be focused on making on-time payments every single month. Making at least the minimum payment and doing it on time will keep your credit score in pretty good shape. Here at CreditCards.com, there's a story about the ABCs of credit scoring , from which you can learn more about what can make a difference to your score.

But as I said earlier, credit scores aren't the only factor examined when making lending decisions. A recent CreditCards.com story revealed that lenders are now making decisions about your creditworthiness based on your purchasing behavior. Some lenders believe that purchases made from certain kinds of merchants (fast food restaurants, thrift stores, casinos) indicate that the consumer making the purchase is more likely to exhibit risky behavior in the future. That could lead to slashed credit limits, bumped-up interest rates and other such penalties.

Credit card issuers can't see exactly what you buy. The standard information passed on by merchants includes: the purchase date; the name, city and state of the merchant; the total purchase amount; and a transaction reference number. The store also provides its merchant category code (MCC), a four-digit number that indicates the company's type of business. What issuers can see, however, is a general pattern of buying. For example, if you've spent $20 or more at a fast-food restaurant 10 times in the past six months, they may make certain assumptions about you, like the ones above. The same thing goes if you frequent massage parlors, thrift stores or other such establishments.  

This can be a dangerous game. It raises privacy issues about what information can and should be shared. It could also lead to issuers jumping to some very wrong conclusions about you. After all, there are countless reasons for choosing to use your credit card in certain instances. Perhaps you intended to use cash but forgot to go to the bank. Maybe you're charging more so you can accumulate airline miles with your card. Maybe you didn't want your date to watch as you counted out the bills to pay the tab. It could be simply that you like the convenience of using plastic.

You get the idea.

See related: What electronic payments reveal about you to lenders, The ABCs of credit scoring 

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Published: January 21, 2009


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