Credit card issuers are becoming more interested cardholders' propensity to accrue debt, because of the profit potential.
Traditionally, the credit card industry has emphasized the use of risk scores to determine the creditworthiness of potential customers.
"Modeling just (credit) risk is passe," said Martin E. Abrams, director of privacy and consumer policy for TRW Information Systems and Services. "Now you want to model everything having to do with profitability."
The three major credit bureaus have recently introduced modeling tools that measure more than just a person's risk score.
They have begun to define risk in different terms.
"Today the risk might be that a customer is not profitable," added Mr. Abrams.
Last week, Equifax Inc. introduced a product called Bankcard Usage Predictor that identifies people who are likely to use a credit card as well as carry a balance.
Developed by the decision systems unit of the Atlanta-based credit bureau, the new product predicts a cardholder's spending patterns over one year, providing both account monitoring and pre-screening information.
It can also be used for cross-selling and increasing credit limits.
"Most of our credit card customers used to rely on models to make a decision on whether to give someone a card," said Alton Adams, vice president of Equifax Credit Information Services. But now "our customers want us to identify people who may not have the best credit risk score and are prone to running up balances."
Equifax's announcement comes on the heels of another product launched by TRW and Fair, Isaac & Co., called Revenue Opportunity Indicator, which provides prescreening services.
The product's aim is to identify customers with high revenue potential.
Revenue Opportunity draws on the Orange, Calif.,-based credit bureau's data file of 185 million credit active consumers and Fair, Isaac's data of bank card payment performance information.
Trans Union Corp., and Fair Isaac introduced a similar product, Revenue Projection Model, in December 1993. This joint offering is used in the prescreening process to determine the amount of revenue likely to be generated in the first 12 months of new card accounts.
The credit bureau products are generally seen as an initial step in the segmenting process. Credit grantors who use these tools, generally apply their own modeling software to the credit bureau data, customizing it to target exactly the type of consumer they are seeking.
"As (consumer) response rates go down and mail costs go up, creditors will be looking for more target marketing tools," said Mr. Adams.
Equifax also launched a product for retail clients that offer private- label credit cards.
The Retail Card Usage Model, Equifax claims, is the first such product to hit the market.
The retail and bank card products represent Equifax's first foray into generic modeling programs, as the credit bureau has only offered customized products to its largest customers.