What You Purchase Can Change Your Credit Score

Did you know that where you use your credit card can make a difference to your credit score? Well, it’s likely that many consumers do not realize the impact particular spending has on their credit. With the tighter reigns on credit, card companies have started using the information gained from your purchases to decide who may be a credit risk. Since companies can no longer extend credit as freely as they once had, what you are buying can really tell your story – intentionally or not. With this information, credit card companies have been reducing lines of credit or completely closing existing cardholders’ accounts.

Consumers who spend at the following outlets may be some of the first card holders to feel the impact of the recent changes in the credit card industry:

• Bail bonds offices
• Casinos or racetracks
• Thrift stores and secondhand shops
• Massages and spas
• Liquor stores
• Pawnshops
• Escort Services
• Counseling Services
• Hospital and Medical Providers
• Court costs

Fair or not, those are just a few of the places that may be considered “suspect” when credit card companies are determining your creditworthiness. Consumers that shop secondhand may be considered a risk because of the perceived notion that they can not afford to pay retail prices. Putting your bail on a credit card can also speak volumes about your financial responsibility levels. Same goes for casinos or any gambling establishments because consumers may be looked at as spending their cash and credit carelessly, leaving little money to pay the bills each month.

However, new laws coming in 2010 will include a provision for requiring regulations on how much information a credit card company can use to determine your creditworthiness. Many in government do not feel where a person shops has any true insight into one’s ability to pay back the balances they owe. These practices are considered to be unfair profiling and congress is looking to change the way matters are currently being handled.

While it is convenient to shop with credit cards, cardholders must be more aware of what they are charging on plastic these days because that information doesn’t just go away once the purchase is complete. The purchase data is stored into a larger database of information about the consumer, which essentially could be used against them until the laws change. Maintaining consumer privacy is at the forefront of many consumer’s minds. Purchasing habits may signal to credit card companies a message that is completely different than the reality but will still negatively impact one’s credit score.

When a credit card account is closed, it will lower your credit to debt ratio, thus dropping your score. That is the reason many people will stop using a credit card actively but continue to maintain an open account. It also helps your credit to have accounts in good standing for many years because that good history also will bring up a credit score. Because credit card companies are unfairly using your information against you, your credit score may suffer as a result.

The credit card companies agree that they do keep track of what people are buying. There are a number of reasons they do this besides determining your creditworthiness. Here are some of the other reasons:

Marketing Data
By knowing what and how people are using credit, card companies can get a better idea of what type of marketing strategies should be implemented to attract more customers.

Fraudulent Use Alert
Consumer information that appears to be out of the “norm” can be flagged by the credit card company and the consumer can be alerted to the possibility of fraudulent activity on the account.

Police Tracking
Credit card records can be and are used to help law personnel track the activity and movement of people using a credit card fraudulently or who may even be on the run as a crime suspect. These records essentially can give the police a time line of where the suspect has gone and when plus information on what they bought, making it more likely the person will be tracked and eventually caught.

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This entry was posted on Monday, June 15th, 2009 at 6:42 am and is filed under Credit Card Advice, Credit Card Use, Credit Score. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.