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Companies get very creative with data about you

Sunday - 1/1/2012, 10:26am  ET

shopping (AP)
About a third of the top 100 largest U.S. retailers target their marketing based on customer buying patterns. (AP)

NEW YORK (AP) - Companies are getting smarter at predicting your next move.

As it becomes easier to gather information on consumers, businesses are crunching personal data in new ways to forecast a wide variety of behavior. In much the same way that credit scores predict how likely you are to pay your bills, a new generation of scores now rate the likelihood that you'll take your medications or redeem a specific coupon.

In some cases, transactions that were traditionally considered off the books - such as rent payments and payday loans - are being incorporated into the growing body of information used to size up customers.

The new uses of personal data raise a host of concerns for consumer advocates, who question the reliability of the scoring models and the accuracy of the information on which they rely. Also troubling is that many consumers are oblivious that they've been tagged with these numbers, notes Chi Chi Wu, an attorney with the National Consumer Law Center. In many cases, consumers have no way to learn what their so-called consumer scores are.

"If this score is about me, I should be entitled to it," Wu said.

With credit scores, for example, lenders are required to disclose a score if it was used to deny a loan or assign a higher interest rate. Those who aren't actively seeking a loan can also pay to learn their credit scores from Fair Isaac Corp., which also goes by the name of its widely used FICO score.

If you're wondering how else businesses are rating you, here's a look at four recently introduced scores you may not know about:

Mortgage scores

Anyone who has applied for a mortgage understands the importance of credit scores. The three-digit figures not only help determine whether a bank will approve a loan, but its interest rate as well.

Now a company called CoreLogic is developing a score it says will zero in on predicting a borrower's likelihood of repaying a mortgage. The score will be based on a new breed of credit reports the company released last month.

These reports gather information that isn't typically listed on credit reports, including information from CoreLogic's in-house databases of rental records and payday loan applications. Also included are public court records, such as property liens, evictions and child support judgments.

The new score is intended to give lenders a more "complete picture" of mortgage applicants, said Tim Grace, a CoreLogic executive. He said that should lead to better lending decisions and reduced delinquencies for banks.

The exact formula for the score is still being developed with FICO. But once they're available in March, Grace said consumers will be able to purchase their scores for a price yet to be determined. For now, CoreLogic is required by law to provide customers with a free annual copy of the more detailed credit reports the company introduced last month. Consumers can request their reports by calling 877-532-8778.

Medication scores

The business of scoring consumers isn't limited to financial matters. A score that was introduced this summer seeks to predict the likelihood that patients will take their medications. An individual's score can even vary depending on the condition; the score is available for hypertension, diabetes, high cholesterol, depression and asthma.

FICO says its Medication Adherence Score is intended to help health care providers flag patients at risk of ignoring doctor's orders. The idea is to improve overall patient outcomes and reduce health care costs. The score is not available to individuals.

Interestingly, a patient's health and credit data are not used to determine the score. Instead, FICO says it can predict compliance based on demographic information such as household size; those who live alone are more at risk of skipping their medications. Owning a car, by contrast, is a good indicator for health care providers, as is being neither very young nor very old.

And as it turns out, FICO says men are more likely to take their medications than women. Other information thrown into the formula includes the rate of bankruptcies in a patient's region and purchase histories culled from the same databases retailers use to target households for catalogs.

FICO, which notes that the scores can't be used for insurance underwriting purposes, declined to say whether the score is being used by any clients yet. But the company has estimated that 2 million to 3 million Americans would be scored by this year, with that number set to rise to around 10 million by the end of next summer.

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