Your Secret Credit Scores

During yesterday’s episode of The Personal Finance Hour, Jim and I spoke with Liz Pulliam Weston, financial columnist and credit score expert. Weston provided background on how the credit scoring system works, and offered tips for how to maintain (and improve) your credit score.

During the show, Weston mentioned a past MSN Money article in which she wrote about 8 secret scores that lenders keep. These lesser known (and confidential) scores are also a part of your credit profile:

You’ve heard by now of credit scores, the three-digit numbers lenders use to gauge your creditworthiness. Credit scores predict how likely you are to default on a credit account or loan; they’re used to help set interest rates and terms. What you may not know is that credit scores are just the start of the way financial institutions evaluate you, and they’re not even the most commonly used scores — far from it.

Weston enumerates eight other scores that are used to evaluate you as a borrower:

• Your response score predicts how likely you are to respond to an offer of credit, such as a credit-card offer in the mail.
• Your application score contains secondary information that’s not factored into your credit score. This is like a reinforcing piece of information.
• Your bankruptcy score is just what it sounds like: a measure of how likely you are to declare bankruptcy.
• Your revenue score indicates how much money a lender is likely to make from you as a borrower.
• Your attrition-risk score measures how likely you are to close your account. Lenders use this in combination with other scores to decide whether a customer is worth retaining.
• A behavior score is like a credit score, but applies to only one account. Each account has a behavior score, which reflects how you handle the account.
• A transaction score is generated for each purchase you make, and is used to determine whether the transaction should be approved. (Or whether it might be fraudulent.)
• If any of your accounts is sent to collections, your collection score predicts how likely you’ll be able to pay your debt.

For more detailed information about these “secret” scores, read the entire article at MSN Money. And for more information from Liz Weston about the ins and outs of credit scores, listen to yesterday’s episode of The Personal Finance Hour (also avaialble on iTunes).

Note: Andy Jolls of VideoCreditScore shared a fun story on the show: “On our third date, I had Molly pull her credit score,” Jolls said, speaking of his then-girlfriend. “I knew that she had credit card debt, and that was concerning to me. But when she pulled her scores, her scores were actually good, so I knew that she had pretty good discipline.” And now Andy and Molly are married!

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Related Articles at Get Rich Slowly:

• Eight Things Every Credit Card User Should Know
• The Secret History of the Credit Card
• The Secret History of the Credit Card (repeat)
• Weekend Update: Christmas is Coming Edition
• links for 2007-03-23

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