If you use credit cards, it pays to keep track of the score - your own, that is
Credit cards have moved to the top of the bill pile, displacing mortgages as the priority for many consumers.
“It used to be clearly the case that consumers viewed their mortgage as their number one payment obligation. That is no longer,’’ said Mark Greene, the chief executive of FICO Inc., the producer of consumer credit scores. Instead, the data FICO crunches show that credit cards have taken over.
There are several reasons for the surprising shift. One is that so many mortgages are underwater - meaning the debt owed on the home is greater than the home’s value. “But we suspect another reason is that credit cards are increasingly important to people,’’ Greene said.
That shift has meant an expanded role for FICO. While the company has no plans to move the focus of its business more toward consumers, it has opened up in recent months, sharing the components that go into a credit score and giving the public better insight into what behaviors can help or hurt a score.
The Associated Press talked with Greene, who has led FICO since 2007.
Q. The new credit card law requires that card statements disclose how long it will take to pay off a balance by making minimum payments. Do you think this sort of information will matter to consumers? Will it be a game changer?
A. I think so. A year or two from now, it may not be viewed in hindsight as such a big deal, because it will be part of the fabric of doing business. But I think initially it will be a big change. I’m a big believer in those kinds of disclosures.
Q. Why do you think consumers are so much more aware of credit scores than they were just a few years ago?
A. I think they’ve learned a lesson from this recession: that you can and should be a good financial steward and keep your own financial house in order. There are many things that are needed there, but paying attention to your FICO score is one of them.
Q. In recent months you’ve let the public know more about what elements go into a FICO score and what actions can change it. Why make that information known now?
A. I think it’s consistent with the industry trying to become more transparent. We try to educate people enough that they can do their own credit repair, without having to resort to some other credit repair operations.
Q. Do you think banks will return to providing easy credit at some point?
A. The large card issuers are already getting back into recruiting for new customers.
They are doing so a little more thoughtfully now. Card issuers have to understand more about the totality of people’s circumstances. I think that lesson has been learned.
Eileen AJ Connelly writes about personal finance for the Associated Press.