• Insurance Risk – That’s right. Insurance companies use credit scoring models to predict whether or not you are likely to file an auto or homeowner’s insurance claim. A poor insurance score will mean that you will pay higher premiums or be declined coverage outright.
• Response Rates – Raise your hand if you receive pre-approved offers of credit in the mail everyday. There is an incredible amount of science behind those offers and why you get them. It’s not random. You have been selected from hundreds of millions of other consumers to receive that offer because you have a “Response Score” that indicates you are more likely to respond to that offer than someone else who didn’t get it.
• Revenue Potential – Credit card companies also use revenue scoring models to predict whether or not you will use their credit card and, therefore, generate revenue for them.
• Collect Ability – For those of you who have collections on your credit reports you can feel certain that the collection agencies assigned to collect those past due debts are also scoring you to determine whether or not you are likely to repay your collections.
• Bankruptcy Potential – Bankruptcy scores predict the likelihood that you will file for personal bankruptcy. You can assume that if you have a poor bankruptcy score that your credit applications will likely be declined.
• Attrition Potential – These scores predict whether or not you will stop using one card in lieu of another. This is called attrition and it is considered the cancer of the credit card industry. If you have a score that indicates that you are likely to attrite and start using another lender’s credit card then you should expect to begin receiving special bonus offers as an effort by your current credit card company to dissuade you from moving on to another card.
• Fraud Potential – Amazingly sophisticated, these models actually can predict whether or not a purchase you are trying to make with a credit card is fraudulent or not. What’s even more amazing is that it takes about 2 minutes to complete your check out at a store and in this short amount of time you have been scored to see whether or not the retailer will accept your credit card.
