Where You Shop Could Hurt Your Credit Score and Credit Limits

Yes, that sounds unbelievable (I thought only payment history, utilization ratio, credit length, etc, determine credit score), but it could actually happen.

Watch this video on Good Morning America yesterday first if you missed the show on TV.

Kevin Johnson, who, at 29 years old, is the CEO of a PR firm in Atlanta and has an excellent FICO credit score of 764, has recently got the credit limit on his AMEX Blue Credit Card slashed by $7,000 even though he paid his balance in full every month and never late. The reason, according to the letter sent to Kevin from AMEX,

Other customers who have used their card at establishments where you recently shopped have a poor repayment history with American Express.

After examining his past charges on the card, it seems that the only place where he shopped could raise the red flag is, well, Wal-Mart, even though American Express refused to tell Kevin exactly which establishments “have a poor repayment history with American Express.”

What AMEX did was using the so-call behavioral analysis to examine card member’s shopping patterns then determine the credit worthiness based on the result, in a way to try to keep default rate down.

Is there anything wrong with what AMEX did? Yes, I think there is, but not because AMEX profiled its card members (yes, people should get different treatment based on their credit history), rather they punished good people for the fault that is not theirs. And, according the the news report, the use of behavioral analysis by issuers are increasing.

Be careful where you shop now!

*Thanks @thewriterscoin for the tip.

Note: You may need to go to the site to watch the video embedded in this post.

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10 Responses to “Where You Shop Could Hurt Your Credit Score and Credit Limits”

  1. devil |  Jan 29, 2009 at 11:44 am

    What AMEX did in this case is astonishingly stupid. All they will accomplish is getting some bad press and (probably) losing a good customer. Customers who pay on time are too valuable to go around tossing them away with both hands.

    If I was Kevin Johnson, I’d drop my AMEX account like a hot brick. With his credit history, he doesn’t need them.

  2. Kristen |  Jan 29, 2009 at 1:53 pm

    I wouldn’t say be careful where you shop I would say “forget you!” to Amex. With the abundance of credit cards on the market and so many different reasons to use them I would think they would be welcoming customers in instead of pushing them away. I won’t doubt they are the next company for a round of layoffs because of the dumb decisions made by their management!!!!

  3. Writer's Coin |  Jan 29, 2009 at 2:25 pm

    Thanks for the mention!

  4. Simon Zhen |  Jun 09, 2010 at 6:10 pm

    AMEX is thinking customers of Walmart are there to save money… meaning that they are probably facing financial hardship… meaning they are in the “high risk” category… meaning AMEX is reducing their risk by cutting customers off.

    Time to switch over to cash or some rewards debit card!