For some people this may be of no interest…..for others this is perhaps a current event in their own lives. Interestingly, some prospective employers also use this method in reverse when making hiring decisions based on a prospective employee’s past credit history.
Card Issuers Get Personal to Check Credit
by Robin Sidel
Monday, June 23, 2008provided byWSJ
When it comes to staying in good graces with your credit-card company, having an unsullied credit record might not be enough.
Lenders have long relied on consumers’ credit scores to decide whether to approve card applications and how much credit to extend and at what interest rate. Now, as financial firms face rising losses because of the weakening economy, some big card issuers are digging deeper into their customers’ personal lives. They are scrutinizing where cardholders live, for example, and what line of work they are in.
Card-industry executives say the heightened focus is directed especially at residents of states hit hardest by the housing slump, such as California, Florida and Nevada. Cardholders who work in struggling industries like construction and finance also are feeling a tighter squeeze, with their credit lines suddenly reduced sharply even if they always paid their bills on time and in full. Other consumers are bumping up against myriad other restrictions.
Michael Shortt, who owns a television-production company in Savannah, Ga., says American Express Co. slashed the credit lines on three of the six AmEx cards that he uses for his business, even though he routinely pays them off every month. Two of the credit lines shrank to $1,000 from $6,000, and the third was reduced to $36,000 from $42,000.
When he called the New York company’s customer-service department, Mr. Shortt says he was told that his available credit declined because he hadn’t supplied information about his company to Dun & Bradstreet Corp., which provides credit data on small businesses. On Saturday, Mr. Shortt got a letter from AmEx notifying him that his $36,000 credit line was being cut to $4,300. He cut that card up Wednesday, he says.
“Of all the people that [AmEx] would want to mess with, why would it be a customer who pays their bills on time and spends a great deal of money?” says Mr. Shortt, who says he has accumulated 780,000 rewards points through his American Express cards. He says he gets calls from Dun & Bradstreet, but he doesn’t feel comfortable providing information about his business, especially over the telephone. A Dun & Bradstreet spokesman couldn’t be reached to comment.
A spokeswoman for American Express declined to comment on Mr. Shortt’s situation but says the card issuer does rely on information provided by Dun & Bradstreet and other sources to help determine credit-worthiness. “We are being more targeted in managing risk prudently within appropriate customer segments,” the spokeswoman says.
The greater scrutiny reflects lenders’ attempts to slow a rising tide of delinquencies and losses from their consumer businesses. Washington Mutual Inc., a big provider of credit cards for subprime borrowers, or those with relatively weak credit ratings, expects credit losses will rise to 9.5% to 10.5% of its total credit-card loans this year, up from 6.9% at the end of 2007. J.P. Morgan Chase & Co. expects its credit-card charge-offs to rise to 6% next year, up from 4.37% in the first quarter of 2008.
According to the Federal Reserve’s latest survey of senior loan officers, 30% of banks said they tightened lending standards, including requiring higher FICO credit scores, on credit-card loans between January and April. That is up from about 10% in the Fed’s survey in January.