@Subexistence wrote:
But FICO does already make specialized tools to help CC issuers assess profitability of their customers, and we'll no doubt see more of that (as ABCD says) especially if most CC issuers start reporting payment history as part of their trended data reporting.
Are you saying card issuers do not like seeing PIF? How can we game these specialized tools so unprofitable customers like me can continue to be unprofitable?
Nope. I am saying that CC issuers like their customers to be profitable. There are two ways that customers can generate big profits for issuers:
(1) Carrying large balances each month
(2) Spending huge amounts of money
#1 generates money via interest.
#2 generates money via swipe fees.
In general, the two groups tend to be separate. Suppose Bob and George each have a credit limit of $10k. If Bob is carrying 9k month to month, then he's likely spending very little (though obviously at one time he was spending more). If George is spending 9k each month, then he almost certainly is is carrying almost nothing -- he's likely paying in full.
The profitability of group #1 is mitigated (perhaps sharply) by the fact that it is generating few swipe fees (low spending) and more importantly is much more likely than #2 to become delinquent or fail to pay altogether, which is very costly for the issuer.
Basically consumer profitability (for CC issuers) lies on a spectrum. At one end are those revolvers who generate a lot of interest revenue but somehow never miss a payment as well as transactors who spend a lot, perhaps getting only 1% in cash back. At the other end are consumers who only open cards with an aim to rake in bonuses, and then after that close them or PC them to no annual fee cards and buy a loaf of bread once a year on them -- or if they do generate spend they are careful to get at least 3% cashback (typically 4-5%) by choosing categories properly. This end of the spectrum involves negative profit for the CC issuer.
The Holy Grail of data mining would be to somehow figure out which Revolvers had nonetheless a low chance of default. CC issuers should be in intense competition to get these people addicted to THEIR cards, much the way that dope pushers in the hood want reliable junkies who will somehow always have some money and will entail little expense in muscle and control. Less difficult would be whether a transactor is especially profitable for one's company -- you can just look at how much he spends. Also part of the Grail ways of identifying CC bonus chasers (described above) who produce negative revenue without generating anything else.
My advice if you want ways to "game" such detectors is to avoid obvious bonus chasing behavior. That would be opening a card, spending a lot, then closing it at month 3 or 4 -- or if you don't close it, dropping the spend to $0. You might be able to fool to some extent such bonus chaser detectors by keeping cards open (but PCing them, which is not evident on a credit report) and also making sure you never stop all spending on a card at month 3. Keep using it every other month, even if it is for something small.
Under no circumstances, however, should you spend more money in total than you would if you had debit cards only. If you do then you are doing what the CC issuers want -- elevating your spending because you have cards. You'll do much better by keep spending low and saving money.
Starting Score: Ex08-732,Eq08-713,Tu08-717
