We’re Watching You

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The next time you apply for a credit card, your credit report and income will be only a part of the criteria used to determine your creditworthiness. For that matter, as long as you have the card, what you use it for will be noted and added to a growing set of data that makes up your psychological profile, which will then be referred to every time the bank deals with your or reevaluates your risk as a customer. The New York Times Magazine takes a look at this new method of determining credit risk, pioneered by Canadian Tire executive J.P. Martin about 6 years ago.

It’s not just that what you buy reflects your socioeconomic level and current financial status, however; what Martin did was take the raw data and tease out personality traits that explained the the purchases while predicting future behavior.

Lenders have been using this sort of data mining ever since, but until recently they’ve kept it on the down-low to avoid triggering any privacy fears from customers. Now, with billions of dollars of losses from formerly profitable customers (i.e. the slightly risker ones) who suddenly can’t pay, the lenders are using their psychological data not only to screen for the “right” sorts of customers but also to try to convince the bad ones to pay off their debts.

There’s another reason for this, too: it helps build a stronger relationship with the customer.

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