Changes in Attitude, and in Credit Score Latitude

Two news items this week show that your customers’ relationship to the credit cards they use to buy from you are changing. And also, more of them might be deemed worthy of that credit that previously thought.

According to an article on Yahoo Finance, in some credit scoring models “recent credit contribution carried the most weight…accounting for 30% of a credit score while payment history determined 28%. Now those portions are 5% and 40%, respectively.”

This is according to Sarah Davies, Senior Vice President of VantageScore Solutions, who also says “”we live in a post-recessionary environment and the way consumers behave and the data that is most predictive has shifted.. there was a laser-light focus on recent credit versus a consumer’s entire credit history, which in the current environment is much more predictive of future default. More granular data takes these shifts into account and a model that leverages this data provides significantly increased predictiveness.””

In other words, by looking at overall patterns and behavior, and not just the fallout from what the article calls “The Great Recession,”  “it turns out that many of those previously unscoreable consumers may in fact be very credit-worthy.”

All of which means, more of your customers may be eligible for better credit, and better cards, than they realize. But when they get those cards, as our second article from TheStreet.com has it, a large number of card holders “remain confused about their rewards and terms.”

In addition to confusion over interest rates and late payment penalties, “many customers say they remain confused about their credit card rewards. Customer understanding of how to earn and redeem rewards with their credit card has dropped over the past year, with 59% of customers saying they ‘completely’ understand how to earn rewards now, compared with 66% last year. One-third of customers said they are unaware of the benefits associated with their card.”

The dovetailing of these articles may provide opportunities for the savvy merchant. By making your own rewards programs clear to your customers, you can induce them to use their credit cards with you (or their prepaid or gift cards, depending on the kind of reward program it is). But obviously, the clearer you make your own program to your own customers, and the simpler it is, the likelier they are to use it.

And since, as our first article has it, you might have even more customers with newly minted cards they want to use — since they’re more credit worthy than before! — be ready for them by making sure you’re payment plans are secure and you offer the most wide-ranging payment options for them.

If you need any help in any of these matters, don’t hesitate to contact your AVPS rep today! We’d like to think that’s a “reward” unto itself!