AmEx rates credit risk by where you live, shop

Gilleland said he has had an American Express Platinum Card for about six years.

“I’ve never had a problem," he said. "They’ve never imposed a limit on me before."

His computer security and data recovery work is “profitable, it’s busy,” he said. "I burn through between $6,000 and $8,000 in travel each month,” which is billed to his clients, he added. He has relied on credit cards to pay for that before being reimbursed and said “it’s been very painful” to have his limit continuously lowered, making his business less viable.

Consumer advocates and credit experts contacted by msnbc.com said they had never seen the profiling considerations cited as contributing to a credit limit reduction, but they were not surprised.

“It’s horrible,” said Linda Sherry, spokeswoman for the advocacy group Consumer Action. “It seems horribly unfair, but they are the ones doing the lending and there’s nothing under the law that can prevent them from doing that.”

Greg McBride, senior financial analyst with the personal finance Web site Bankrate.com, said, “This is something that’s coming across the radar screen as more and more consumers are being denied credit or seeing existing credit scaled back as a result of specific purchase behavior or other entities that they do business with. … Card issuers across the board are playing defense now. Nobody’s giving out credit like it’s candy anymore.”

Ed Mierzwinski, federal consumer program director with the U.S. Public Interest Research Group, said, “There’s no question that this type of behavioral score is used by everyone. They just don’t like to admit it. … It sounds like American Express is dialing up the impact.”

Dialing up 'the ding'
For instance, Mierzwinski said, “For years, you’ve been dinged if you purchased your stuff at a rent-to-own store on your credit card. The ding used to be very small. It sounds to me like they’ve dialed up the ding.”

Gilleland was mystified about what among his own purchases  may have drawn attention from American Express’ risk analysis system.

“I’ll tell you where 90 percent of my purchases are: Avis, Hertz, Target and Best Buy,” he said. He also is irritated that a mortgage he obtained from the embattled lender Countrywide — now owned by Bank of America — had apparently brought scrutiny because it was a refinancing to get out of an adjustable-rate loan and into a 30-year fixed product.

Spokeswoman Forde said American Express would not divulge any of the "establishments" where a cardholder’s shopping might trigger a review. That is “one of the many factors in our property risk model, and it actually changes frequently,” she said.

The company does not review actual items purchased by its cardholders in assessing risk, Forde said.

On the mortgage issue, she said the company does not differentiate between loans obtained directly from a lender and those sold in the secondary market to such lenders.  “In the aggregate, outstanding loans with certain lenders tend to have a higher proportion of credit issues on our card member base,” she said.

Forde stressed that “we take all appropriate measures to meet all fair lending laws.” “I think you have to keep in mind that these are not the only decisive factors,” she said. “We are looking at somebody’s overall profile. … It’s a holistic look at someone’s overall credit profile.”

For Gilleland, the father of three young boys, the credit crunch is just one of a number of financial blows hitting at once. His Virginia home has plummeted in value to far below the amount of his mortgage, and his business expenses are climbing.

“I’m literally at the point where I have to fold the business up, and another dream bites the dust,” he said. “I went out to Monster.com and uploaded my resume because I have to look for a W-2 job. … It will take years for me to recover from this, especially as I’m firmly committed to not filing bankruptcy.”

Consumers: Pay attention!
McBride, of Bankrate.com, said what happened to Gilleland is “something people need to know about, even if there’s not a lot of direct consumer action you can take.”

Consumers with good credit also need to be aware of the flip side of the story, he said.

“If you have a credit score of 700 and up, you should be seeing lower rates now than you did a year ago,” McBride said. “If you find that your card issuer isn’t playing ball, it’s time to shop around.”

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