Can your credit score help the card issuer?
August 19, 2011
By: Geoff Williams
Everyone knows about the FICO score, but it's not the only thing credit card companies look at when deciding how much of a credit card deal to offer you.
You probably won't be surprised to learn that credit card companies consider your revenue, or how much money comes in, when deciding whether to offer you credit. Based on your application, banks calculate a little-known number called the "revenue score" to help make the decision.
Nobody expects to be given a credit card if they aren't bringing in revenue. Right?
What you may not realize is that the revenue score has nothing to do with your own income. It has to do with how much money the credit card issuer expects to make from you.
What it is: The revenue score is an indicator, known only to the credit card issuer, that predicts how much money the issuer can expect to make from you. You might cynically think, what, they don't make enough money from me already? They need to know how much I'm bringing to the table? Well, yes.
The FICO credit score gets most of the attention because it's a handy and well-publicized way to sum up your credit risk in a single number. But behind the scenes, the revenue score and its cousin the application score play important roles in getting you approved for credit.
Why you should care: If you like getting credit card offers, your revenue score can influence how many of those you receive, and their quality. John Ulzheimer, a nationally recognized credit scoring expert and president of Ulzheimer Group LLC, says, "Revenue scores are commonly referred to as marketing scores. It helps [banks] make better decisions as to who they want to market to."
You might think that it's important to occasionally carry a little revolving balance, to give your credit cards a chance to make some money, so you can improve your revenue score. But consider carefully whether you want to risk getting trapped in debt just to improve a score you'll never see.
After all, according to Reuters, there were 1.53 million bankruptcies in 2010, and 1.4 million expected this year. Those people won't be making money for the credit card companies any time soon.
Should you try to improve your revenue score?
Ted Connolly, a bankruptcy lawyer based in Boston and the author of The Road Out of Debt, cautions: "I would hesitate from advising anyone to take steps to raise the revenue score. Credit card companies make the most money from those cardholders who have the highest interest rates.
In fact, as Ulzheimer notes, "There's no value to the consumer to improve their revenue score, unless [they] want to get more credit card offers in the mail."
The last thing you want to do is help your revenue score but hurt your FICO credit score. A useful way to look at it: A good revenue score benefits the credit card companies; a good FICO credit score benefits you.
Connolly believes that the best revenue scores are likely to be "a combination of the likelihood of consistent payments, close or at the minimum payment level, with a balance that is charged the highest interest rate possible. The score may also include the likelihood of receiving cash advances, which always entail the highest interest rates. These behaviors are what credit cardholders should avoid at all costs."
In other words, if you have a high revenue score, you may be a juicier prize to credit card issuers. This may get you more credit card offers, but those offers probably won't be the best credit card deals out there.
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