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What Are Alternative Consumer Scores?

June 10, 2014
Credit Score
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FICO scores aren’t the only way creditworthiness can be assessed.

Although the FICO score is considered the gold standard to determine creditworthiness, other services have cropped up in recent years to assist underwriters in making credit determinations. It isn’t that a FICO score has become any less useful, but following the financial crisis, firms began mining other data to provide as comprehensive a view of a borrower as was possible.

Data mining has reached epic proportions. Because virtually every transaction is tracked, and much of our individual behavior is posted via social media, data miners can learn tremendous amounts about possible borrowers. If that notion scares you, welcome to the age of the Internet and the double-edged sword it provides.

Here are a few of the scores you may be the subject of, and may not even know about.

Insurance score

Insurance companies pull data from your credit report to form their own insurance score. This is combined with other information, such as the notorious CLUE score, to help underwrite and determine premium charges. Insurers also look at your driving record and data like court judgments, which are predictive of insurance claims.

Tenant score

Your credit bureau data is combined with any history of evictions you may have, as well as any adverse court judgments or other liens. A landlord wants to rent to the right person, after all.

Health score

Although your health care provider must keep your health data private, you are likely offering all kinds of data about the state of your health to third parties and never know it. Don’t throw out those privacy notices you get from, say, your health club. They may tell you that they sell your data to third parties. The same goes for health spas, mail-order OTC drugstores and even private “healers.”

Churn scores

Any time you use a service in your home – cable TV, phone service, utility, Internet provider – your usage is tracked meticulously. These service providers are always watching to see what else they can sell to you. They also, however, track how often you flip to another provider. We all do that from time to time, if a competitor offers a great incentive, for example. A churn score may tell a service that it will need to get a large deposit from you, or that it will need to engage in aggressive retention efforts, or that you may be susceptible to upselling.

Nonprime credit bureaus

FICO scores and the Big Three credit bureaus aren’t the only credit trackers. Companies like Clarity Services track usage data of the nonprime consumer. For people who use pawnshops, payday loans, installment loans or title loans, these nonprime bureaus help lenders decide whether people are a good credit risk for these particularly products.

Social scores

Do you have Klout? That’s right, the Klout service exists to measure the influence someone has on social media. When combined with other public social media information, you might become a target for specific advertisements.

If it seems a little creepy that everything you do is tracked, you’d be right. You should carefully consider just how much data you willingly provide a third party. You should always read privacy notices, even when registering for a webpage.

Big Brother is definitely watching.

Data mining image via Shutterstock