Hidden Credit Scores that Affect Your Life

Before you ever receive that solicitation letter from a credit card company urging you to request their card, they've been checking you out.

Naturally, they check your standard credit scores. They do want new customers who are most likely to pay their bills each month. But they don't stop there. Sometimes even people who are currently paying their bills turn to bankruptcy as a way to stop.

Thus, they'll check your bankruptcy scores. Equifax offers a score called the bankruptcy navigator index, or BNI. This score, and others like it, predict the likelihood that you'll file bankruptcy in the future.

But knowing you're a safe risk isn't enough information to put you on the mailing list. They want to know if they're likely to get a good return on investment by mailing to you.

More scores help them make the decision to add you to the mailing list, or cross you off their list of potential customers.

Sending direct mail isn't cheap, so those lenders want to know the likelihood that you'll make it worthwhile for them. They want to see a high probability that you'll say yes to the offer. The credit score they use to decide if you'll go on the mailing list is called a "response model."

But that's not enough to know, either. You could have solid gold credit, and you might enjoy owning a whole pocketful of credit cards. But if issuing you a card won't result in revenue for the credit card issuer, they aren't really interested in doing business with you.

You could be one of those customers labeled a "deadbeat." No, not because you fail to pay, but because you always pay. Customers who pay every bill in full without ever incurring interest charges, late payment charges, or over-limit charges just aren't very profitable for the lender. All any of them will get from your credit card use is the fee the retailer pays for the privilege of taking cards. And - they'll still have to spend money mailing you a monthly statement. They'll use a revenue score for this one.

Finally, after you've mailed in the application, they'll apply another score. This is a back-end credit report and it determines the credit limit and interest rate they'll offer when they mail back your card.

This final score, by the way, is the reason why you might respond to an offer for a $50,000 credit line at 4.9%, but when the card arrives it has a $5,000 credit limit at 14.9%.