Giving credit where it is due

Those with poor credit scores might be deadbeats. At least that is what some companies that use credit scores to assess trustworthiness seem to think. Credit scores not only indicate one's likelihood to repay debts on time, but also act as a gauge of character when applying for a job or for determining car and home insurance rates, said Josh Lauer, assistant professor of communication at the University of New Hampshire in Durham. He studies credit reporting and financial identity. "The issue is not simply whether a person has the financial means to pay, but whether they are sufficiently compelled — by moral obligation or fear of legal sanction — to pay at all," Mr. Lauer said in a statement. While there are indeed times when consumers are unable to pay their debts on time, he insisted that extreme events, including unemployment or large medical expenses, are the factors that push individuals into insolvency. In some cases, creditors have used behavioral scoring models to determine whether they would treat individuals as creditworthy. One example is Atlanta-based CompuCredit Corp., which offers credit cards to underserved customers. In June, the Federal Trade Commission took the firm and a subsidiary to court, accusing them of misrepresenting the credit they provided borrowers and for failing to disclose fees. According to the FTC's complaint, CompuCredit also used an undisclosed behavioral scoring model to reduce the credit lines of customers who used their cards at pool halls, pawn shops and bars. That case is still being deliberated in U.S. District Court for the Northern District of Georgia in Atlanta.