A few weeks ago, I got an e-mail from a reader, Mark, who was recently declined for a credit card. The reason? Not his credit score, which falls into the "good" range. Instead, this lender told him that he already had "sufficient credit available." They didn't want to give him more.
This sort of thing can happen for a few reasons — maybe the lender was worried that he was in need of fast cash — but Mark's issue caught my attention because it shows that borrowing is about more than just your credit score.
Banks often dig even deeper in an effort to find the best borrowers and weed out those who might be at risk of defaulting down the line. Here's what else they may be looking at:
Behavior scores. These scores have always been around, but they may be more important right now, says John Ulzheimer, president of consumer education for SmartCredit.com. A behavior score monitors your performance on one account, looking at historical credit limits, whether you pay in full or carry a revolving balance, in which you use the card, if you've ever gone over your limit. These are things that aren't necessarily on your credit report. These scores stay within that one lender's files — so if you have a credit card with Citibank and a credit card with Capital One, each bank has a behavior score for you based solely on your performance with their card.
When you call and ask for an interest-rate reduction, or a credit-limit increase, the bank will likely look at your behavior score and your credit score.
You don't have access to your behavior score, so the key takeaway here is that if you have a good credit score, need a new credit card and you're declined by your current lender, it might make sense to try a new lender. This is the advice I gave to Mark. Just make sure you're not aiming too high, says Ken Lin, CEO of CreditKarma.com. Sites such as lowcards.com and cardratings.com will tell you what kind of credit score is required for the cards featured.
Your shopping habits. This ties into your behavior score, but it's important enough to highlight on its own. Lin tells me that there is some evidence that banks may be looking more closely at how you're shopping — not just what you're spending, but where. "There's speculation that if someone historically shops at, say, Bloomingdale's, and the bank sees them shopping at Wal-Mart, it could trigger an account review. They might wonder if you were recently unemployed. It could lead to a higher risk profile of the user, all else being equal."
- Bankruptcy score. This is exactly what it sounds like: It gives lenders an indication of how likely you are to file for bankruptcy. These scores are developed by FICO and available to creditors from Trans-Union and Experian, two of the three major credit bureaus. They're not available to the public.