Credit Card Help: When Lifestyles and Credit Scores Collide

Everyone with a credit card or loan of some kind understands that making a late payment or missing a payment altogether will hurt their credit score. In general, when we talk about a credit score, we’re referring to the FICO score, the three-digit number calculated by a formula created by Fair Isaac. But some companies rely on their own formulas for score calculations that are then used to make decisions about consumers and their credit worthiness (or lack of it!).

For example, your mortgage interest rate, credit card maximum limit amount and the amount of money you pay for automobile insurance premiums may all be a result of proprietary scoring models created by statisticians for the companies you do business with. The trouble with such systems is that consumers don’t have any idea what factors are playing a role in their financial futures. How can you work at managing your credit if you don’t even know what companies use in their calculations?

There’s currently a Federal Trade Commission suit against CompuCredit’s Aspire Visa card. The credit card is intended for risky borrowers and falls under the classification of a subprime credit card. The card, like all credit cards, claims you can use the credit card anywhere. The problem is, CompuCredit conveniently left out the fact, that if you use your card in certain locations, your credit line could be cut. A reduced credit line often results in a lower FICO score, as it reduces the amount of credit you have available to you while simultaneously increasing the amount of available credit you’re utilizing.

What purchases are punished by CompuCredit? Any purchases made through tire retreading shops, bars, marriage counseling offices, billiard halls and massage parlors, to name a few.

Is it possible your lifestyle and credit score are working together to influence other lenders as well?

Tags: bad for credit, improve credit, lifestyle and credit

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