Are Banks Ratcheting Up Their Profiling Efforts?

You know that your consumer profile is used by financial services providers to make a number of decisions about you. Before I could get satellite TV service, I had to submit to a credit check.  Employers increasingly want a peek at your credit report, and insurers often use your credit as one of the criteria in determining your premiums.  But your credit history isn’t the only thing that others are interested in.  Consumer behavior — and how to protect against risks — is becoming a major concern of many financial services companies. Which is why banks are increasing their efforts to learn more about you.

Opening an Account: Have You Been Reported to ChexSystems?

Many consumers are unaware that they might have a ChexSystems report.  This is a reporting agency that banks can choose to make use of.  ChexSystems banks report consumers who have bounced a check, or those that repeatedly overdraw their accounts.  If you have been reported to ChexSystems — and the report lasts for five years — if you try to open an account at another ChexSystems bank you could find yourself being denied.

Many of us don’t consider the possibility of being denied in an attempt to open a checking account or a savings account, but it is a reality.  Not all banks are involved with ChexSystems, though.  But you should be aware of this possibility, and find out whether or not your current bank, and possible future banks, are reporting to ChexSystems.  Under the FACTA amendments to the Fair Credit Reporting Act, you do have the right to see one free copy of your ChexSystems report each year.

FICO 8 Mortgage Score

Starting in October 2010, FICO began offering a special product to mortgage lenders: Its FICO 8 Mortgage Score.  Based on the fairly recent upgrade to the FICO scoring model, FICO 8, the Mortgage Score includes a formula that focuses on items that might indicate that a borrower might be at risk for walking away from a home in what has become known as a “strategic default.”  The FICO 8 Mortgage Score is designed to place emphasis on risk factors that could indicate that you are likely to default.

Income Estimates

Banks can also profile you based on what they think your income might be.  Apparently, credit bureaus can put together an income estimate for you, based on the size of your mortgage, how much debt you have and how you are paying it down, and possibly other factors.  These income estimates (which you don’t see when you check your credit report for errors) have been ruled by the Fed as acceptable for banks to use when evaluating whether or not to extend credit to you.

What’s Next?

There has been chatter in recent years about the possibility of banks and other financial services providers using your purchases to make judgments about you.  A couple of years ago there was a great deal of of buzz surrounding the idea that credit card issuers might be tracking what you were buying — and where you were buying it — as part of making decisions about reducing credit lines and making other decisions. Honestly, though, with so much of our data flying around, it is laughably easy to track what we are doing financially.  And all that consumer information may one day be used to further tighten the credit scoring algorithms that are increasingly important to your financial success.

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Published or updated December 6, 2012.

Comments

  1. I’m not a big fan of the fact that corporations have been given more control over our personal and financial information than we have. In Europe, no one except a lender can pull a credit report (no landlords or employers). And, they have far less identity theft than we do.

    Some are calling for consumers to be the ones who hold access to their data and can decide when and to whom to release it. The company First Data is looking into a way to provide consumer generated credit reports. If I were looking for the next big thing in business, this is where I’d be watching.

    • That would be interesting if we had control over who sees our data. But I can also see that as making it difficult to get credit when needed.

  2. I noticed this a few years ago and it prompted me to switch to a credit union. Not only do I save on fees but I also receive better service. I find that the less you deal with corporations the better.

  3. Forgot to add: I also think that profiling has become a tool for numerous businesses and with the internet it is hard to get away from it.

  4. Once again makes me want to move to cash! Unfortunately I had a checking account that was charged a miscellaneous fee and caused it to overdraft. I had no idea because I did not recieve paper statements or notifications. Imagine my surprise when I pull my credit report and see a charge off for 8 bucks. Ridiculous.

  5. metamantis says:

    My social security number should be only between my employer I and the government according to federal law. The fact that these companies connect loans based on name not even name and birth date leads to inaccurate information.

    I think there should be a separate number for identification and that my financial information is none of my employers business. They can bust me for stealing or past firings for cause. They don’t need to say because I was unable to pay my bills during a bad economy that I can’t flip burgers. The jobs that do this the most are the entry level jobs where it is the least important.

  6. Thomas Vargo says:

    The year 2014 is promising for people without checking accounts because they were unable to open a account in the past because they had a mark or marks on their Chexsystems report. Many banks and credit unions today offer “fresh start” and “second chance” checking accounts to those people affect by this consumer report. On organization called “Info Aviator” has even compile a state by state list of these financial institutions offering these programs. This fairly current list can be found at http://infoaviator.org/finance/checking-accounts/2014/05/28/how-to-open-a-second-chance-checking/.

    Good lucks guys and don’t forget not to mess up this second chance!

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