Your FICO Credit Score Follows You Around the Web

In one of the more absurd public privacy invasions online, Google has announced they are going to use FICO scores to help advertisers target ads at consumers in different credit buckets.

I wonder if at some point in time if AdWords advertisers selling the scammy government grand & biz-op offers will get to use this data to target poor people with low credit scores. It only makes sense that Google would spin this positively stating that it is good for brand advertisers to find credit-worthy customers, which is the story that was marketed in the above linked piece:

Consumers with high FICO scores demonstrate some unique attributes that show they shop carefully for the best cards. For example, shoppers begin using search earlier in their application process, they use the term "best credit cards" at three times the rate of lower FICO shoppers, and they are more likely to use branded terms.

Consumers with high FICO scores use non-branded search terms more than branded -- approximately 60% of high FICO searchers. They tend to search on terms, such as "travel rewards," "low rate," and "balance transfer."

From a marketer's perspective this makes a lot of sense. Smart people who manage their credit well look for tangible benefits in their financial choices...they don't just blindly buy the brand.

The problem is that (so long as the current bankruptcy "reform" remains in tact and taxpayers bail out any banking losses) bankers have little to no incentive to reach people with good credit scores. People who pay their credit cards on time are seen as deadbeats while the least credit worth are the profitable market segment because they use credit ignorantly and accrue billions of dollars in unneeded fees every year:

Overall, we find that debt literacy is low: only about one-third of the population seems to comprehend interest compounding or the workings of credit cards. Even after controlling for demographics, we find a strong relationship between debt literacy and both financial experiences and debt loads. Specifically, individuals with lower levels of debt literacy tend to transact in high-cost manners, incurring higher fees and using high-cost borrowing. In applying our results to credit cards, we estimate that as much as one-third of the charges and fees paid by less knowledgeable individuals can be attributed to ignorance. The less knowledgeable also report that their debt loads are excessive or that they are unable to judge their debt position.

Bankers have historically hidden these fees in illegible 30+ page contracts, as mentioned by Elizabeth Warren

I teach contract law at Harvard Law School and I can't understand my credit card contract. I just can't. It's not designed to be read. Read the Government Accountability Office (GAO) study on this. The GAO looked at credit cards and they said: "Nobody can understand this stuff." Are you kidding me? And understand when you've got terms that say: "In effect, we'll charge anything we want any time we want for any reason or no reason at all," what's the point of reading it?

She later commented on the ideal credit card customer

Every credit card for a credit card company is like a lottery ticket. They're just waiting to see who's going to maybe stumble a little. Maybe get into trouble on a car loan. Maybe nothing at all except they just look vulnerable. They're just in the right zip code. They're just the right profile for people who won't be able to run any place else. And those are the ones you slam. Those are the ones you hit with the 29 percent interest rate, the 35 percent interest rate, the new fees. And then, because of course if you can't pay it, then you get hit with a fee for not paying or for paying late, for going over limit. And the game is afoot. With any luck at all from the credit card company's perspective, these people will become little annuities that will just keep generating profits for the credit card companies for months, for years, maybe forever.

The idea of only servicing legitimate debt needs of customers that can afford their credit card bills has made banking industry executives so angry that they are threatening hitting consumers with lots of bogus new "conveninece" fees:

Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.

Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.

This new consumer-credit profiling Google is offering will be far more profitable to use on the poor, the weak, the desperate, the ignorant, and the uneducated. In early research Lawrence Page and Sergey Brin stated

Since it is very difficult even for experts to evaluate search engines, search engine bias is particularly insidious. ... We believe the issue of advertising causes enough mixed incentives that it is crucial to have a competitive search engine that is transparent and in the academic realm.

So were they right back then? Or are the right now? They can't be both.

Update: Sandra from Google's PR team emailed me the following

I've included an outline of the research methodology below the body of this note. Please let me know if you have questions or need clarification on any of the below -- or anything else, for that matter.




* Compete conducted a clickstream analysis on their opt-in panel of 2 million US online consumers, to associate FICO score categories with sites in the Google Content Network.
o The analysis took a look at the online behavior of Compete's opt-in panelists who shopped for or applied for a credit card online between January and March 2009, for the 30 days prior to the application and/or research.
+ Compete, via a sister company that provides secure matching of certain characteristics (one of which is FICO scores) to anonymous/anonymized individuals in the Compete panel, segmented the opt-in panelists into one of three categories, based on their FICO score: Super Prime (720 and above), Prime (600 to 719), and Sub-Prime (below 600).
+ Individual scores and personally identifiable information were not used by Compete, nor were they received by Google.
o Google provided Compete with a list of all sites in the Google Content Network.
o Compete compared how panelists in each FICO band searched and where the panelists spent time on the GCN, and ranked each GCN site based on its ability to reach consumers in particular FICO score bands.
o The ranking/scores of the GCN sites were passed on to Google -- not any information about the credit scores of individuals.

Published: June 29, 2009 by Aaron Wall in google contextual advertising


June 29, 2009 - 3:42pm

I believe they were right back then - when they were perhaps a little more wide-eyed and altruistic in their pursuit. As Cyndi Lauper said, "Money Changes Everything" and nowhere is this more evident than in Google. As revenue and market share increased I believe the Google focus shifted from one of service to one of opportunity. I think there is no turning back - this money machine is on the road to offering less and less value every year.

I am frankly offended each time I see the engines serving me what they THINK I it because of geo-targeting, surfing behavior, or (shudders) my FICO score. I don't use search engines because I want to see pre-filtered results - I am never in that much of a hurry that I can't look through decent results and pick what I want to see. The issue now, seems to be getting decent results to choose from.

Thanks for this insight may be creeping me out, but I appreciate it.

June 29, 2009 - 3:53pm

Although the poor and dumb are an attractive demographic, there's nothing better but "rich and dumb."

The best "opportunity seekers" I ever met was a couple that had inherited great wealth from the founders of a ~large~ European conglomerate.

They felt the need to "prove" that they were "worth" the money they had, but there was no way in hell they'd get a job that makes that kind of money, and the odds weren't good they'd make a business that successful.

So they frittered time and money away on Scamway and every other M.L.M. that came along. They were always getting fleeced on dodgy investments. This was the 80's, so they were always going to meetings of Reaganite sorts of causes, and meeting new people with new "opportunities" for them. Fortunately for them, they could afford to bleed...

Sometimes I think about getting into right wing politics 'cause the money is better... Did I tell you about the perpetual-motion nutbar who scammed $2M out of a "superchurch?"

June 29, 2009 - 4:50pm

Too true CureDream. But the reason it is easier to get the poor and dumb is because there are millions and millions and millions of them...the rich and dumb starts off as a small category and quickly shrinks from there after each stupid investment. Whereas the poor and dumb often stay that way for a long window of opportunity.

June 29, 2009 - 5:16pm

Now this is an eye-opener. Terrific article, Aaron - and scary perspective for consumers!

The affiliate networks must be salivating.

June 29, 2009 - 7:14pm

The affiliate networks must be salivating.

Or scared, as they realize that Google will prefer to only work to share bits of their scads of data with select partners.

Either you are one of 'the chosen' or you are not. At most only a few affiliate networks will be lucky enough to partner in on the deal, unless Google decides to open it up to everyone.

June 30, 2009 - 4:54am

I think Google would want to share it as widely as possible. This is another tool in the same line as GA, GWO, and all the adwords reports: make advertisers more efficient, and they'll spend more. As Ben Edelman pointed out and you've said yourself - Google swallows advertisers' margins as they destroy their own commons (eg the traffic auction) with ever-higher bids. Google will most likely want to get out of their way in letting themselves bid each other to breakeven (starting from profitability...).

The flip side is that you may be right if they use this to break into display ads... Which the scamvertisers buy in abundance.

June 29, 2009 - 8:25pm

Interesting post. Perhaps Google has a long term plan to create and control more information than we give it credit. While I don't consider myself a conspiracy theorist, I do believe Google itself retains more relevant and recent information about us than do the credit bureaus and credit issuing companies combined. We enter some of our most personal and deepest information into Google's Gmail (emails, contacts, calendar, chats), Documents, Latitude, Voice (coming soon), Wave (coming soon), Reader (our desired content), Images/photos and more.

What does this all mean? If you think credit card companies understand your spending habits, Google will soon (if it doesn't already) know who you are, possibly where you are (see Latitude), who you know (including phone numbers and addresses), know the contents of incoming and outgoing emails, who you're avoiding (see Voice), what you're interested in, and more.

I guess you might be okay if you're using an alias (bogus names when signing up for your Google account). You would still have to worry about all the valuable info you upload.

The million dollar question is: How will Google use all this information in the future. My guess: Companies (including the credit companies, collection agencies, and credit bureaus) will bang on Google's doors to buy this valuable information to help track down the non-deadbeats. :)

June 30, 2009 - 12:59am

Well done, Aaron.

I suppose that this trend is really unavoidable as more and more information transitions from the private to the semi-public domain.

P.S. If you want to see a great documentary that speaks to issues outlined in this post, make sure to check out "Maxed Out"

June 30, 2009 - 9:24am

To quote FML:

Today, my bank card was skimmed (copied electronically) and my account was totally cleaned out. I had only just got paid and don't get paid again for 4 weeks. The bank says it will take 21 days minimum to resolve. They offered me a credit card with a huge interest rate to help me get by. FML

Thanks a lot for enlightening us, Aaron. I really appreciate your effort to bring truth to light.

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