Does Your Bank Know Who You Are?

Does that mean they'll cut your credit limit?

Banks know a few things about you: your name, address, and SSN... and what else?

Banks have a lot of information. What they make of that information may or may not be accurate.

Consider everything that happens in your bank account or with your credit card. You make payments to different businesses, your paycheck may be automatically deposited, and so on. With that information, banks make assumptions about who you are.

As technology improved (this is nothing recent) and the financial crisis made banks more skittish, "who you are" matters more and more. Banks and credit cards have cut credit lines based on transactions. For example, spending money at a certain pool hall makes them think you're a risky borrower, while buying birdseed makes them think you'll always pay on time.

Credit scores have traditionally done the job, but banks increasingly look at individual transactions - not just summary information about your borrowing history.

Why does this matter? You need to pay attention to what the bank knows about you and how you use accounts. Whether you agree with the practice or not, banks use data from your transactions (and those of thousands of others) to judge you.

Further reading:

• What Does Your Credit-Card Company Know About You?
• Audio: They Know You
• What is Credit?