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Think your credit card issuer looks only at your income and FICO score when deciding what kind of credit card you deserve? Not anymore.

As millions of Americans recover from the sharpest downturn since the Great Depression, a growing number of credit card issuers are quietly testing new, more comprehensive ways to evaluate customers' creditworthiness.

In many cases, that includes looking at a wide range of nontraditional factors, such as the value of your home, whether or not you have a criminal history, how often you change addresses and what kind of professional license you may hold.

Lenders hope that by supplementing traditional credit scores with nontraditional information, they'll be able to offer more cards to more people -- without getting stiffed the way they did before, experts say.  

"Lenders want to grow their business again," says Ankush Tewari, the director of strategy and market planning for LexisNexis RiskView, which offers card issuers alternative credit scores based on information in public records. "They want to open their doors again, but they don't want to repeat the same mistakes they made prior to the recession."

How it began

Before the downturn, issuers grew their businesses by offering cards to nearly anyone who'd take one. Now, after writing off billions of dollars in unpaid loans, they are trying a more selective approach.  

"Issuers are using other data sources to make more informed decisions," says Philip Philliou, a New York City-based consultant to card issuers. Nontraditional data, such as payment history on a cellphone or an applicant's frequent use of prepaid cards, "helps the issuer develop a clearer picture of who the cardholder is," he says.  

The use of nontraditional data also helps lenders identify people whose traditional  FICO scores took a beating during the recession, but who are normally much better at handling credit than their scores would suggest, experts say.

"These are people who actually are a good credit risk," says Tom Johnson, the vice president of business development at Zoot Enterprises, which helps issuers approve applicants for new cards. "They just happened to have lost their jobs during the recession."

Many potential cardholders have sold the homes that were dragging down their finances or have found new jobs, but their credit scores remain stuck in time, Tewari adds. (It takes at least seven years for a negative mark to fall off someone's credit report.)

"Fifteen million consumers had their credit scores (negatively) affected as a result of the recession," Tewari says. "It's been five years now . . . many of them have recovered and moved past those credit difficulties, but their traditional credit score doesn't indicate that."

Questions remain

Experts say that most credit card providers, including the largest issuers, are either using nontraditional data already or actively examining it. "All the issuers out there are looking at better ways of making decisions and lending," Tewari says.

That's especially true now that, per the Credit CARD Act of 2009, issuers can't increase cardholders' interest rates without giving them 45 days' notice, Tewari says, "so that upfront decision is even more important."

Not everyone, however, is convinced that incorporating nontraditional data is the answer.

"From our perspective, the challenge is the comprehensiveness of the data collection," says Dave Bowen, a senior vice president at KeyBank, which is exploring alternative data but currently doesn't use it. "With things like debt instruments, loans, all banks, all credit unions, all finance companies, we're all reporting that very consistently, very thoroughly." So the details that the big three credit bureaus -- Experian, Equifax and TransUnion -- collect are more dependable, he says.

Alternative credit-score providers, by contrast, often collect much less consistent information, such as rental payment history or utility payments, which aren't consistently reported by landlords and utility companies. For example, "there are tens of thousands of small landlords who aren't going to (consistently report their tenants' payment data)," Bowen says.

Consumer advocates also worry that some alternative information may not take into account complex circumstances and, as a result, may actually harm people more than it helps them. "More data is not always necessarily better data," says Chi Chi Wu, a staff lawyer with the National Consumer Law Center, who has testified before Congress about alternative credit reporting.

Sometimes renters, for example, will find that the only way to get a landlord to resolve a legitimate dispute is to legally withhold rent. However, that could seriously harm the renter's credit history if it's reported as a missed payment, she says.

Low-income consumers may also struggle to pay their utilities on time when the weather turns extreme; but if the late payments are reported, their credit may be unintentionally damaged by a service they can't opt out of, Wu says.

"Utilities are different. It's not like a credit card where you have a choice," she says. "Everybody needs heat and light."

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