John knows he’d better pay his bills on time if he and his wife are to buy their dream house next spring.  He finally has his credit score cleaned up, and doesn’t want to go through that arduous process again.

What John doesn’t know is that the bar tab he picks up with his credit card every Friday - to collect points towards the honeymoon plane tickets - could work against him.  His buddies always reimburse him immediately with cash for their portion of the tab, and he always pays the bill off completely when it comes due.

So why is it a problem?

Credit score calculators such as FICO incorporate a number of factors besides the obvious - keeping up with your payments.  Where and what you purchase can also play a role.

So, when crunch time comes, the fact that John frequents a bar every Friday, and spends a large amount of money while he’s there, could effect his credit score.

And as we all know, the level of his credit score will determine the interest rate he’ll pay on that mortgage.

Here’s an example of how your credit score affects your mortgage payments from Fair Isaac.

Here’s how Americans rate:

So what other lifestyle habits could bring that score down?  Business Week reports that:

• frequenting gambling resorts, massage parlors, billiard halls, and liquor stores.
• visiting a marriage counselor or individual therapist.
• buying retreads or retreading tires ( I don’t quite understand this one.)

More stringent credit score calculators are used under different circumstances.  For example, when someone applies for a high risk subprime loan, they are being judged on more criteria than someone with good credit applying for a standard loan.

Recently the Federal Trade Commission (FTC) sued Atlanta-based CompuCredit for not disclosing to its customers the exact terms they were being measured on when applying for credit.  Mind you , the FTC sued them for not disclosing the terms, not what the terms are.

The customer is purposely mislead, and the terms are kept vague.  It’s been a gray area in the credit world, trade secret.

The fear is that these calculators are being used to “weed out” people based on race, gender, or sexual orientation.

More regulation needs to be legislated that would force credit companies to openly divulge the exact terms that it’s potential clients will be judged on.

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