by Joseph Kenny | 07/23/08

For almost as long as credit card companies have existed, it's been common practice for the companies to look at consumers' financial histories and credit ratings to determine what kinds of credit cards they offer a given consumer. Nowadays, the credit crisis has driven some credit card companies to expand the scope of their inquiries, into a realm some consumers might consider questionable: potential credit card users' personal lives.

Namely, banks and credit card companies are trying to compensate for their recent losses by looking at where their customers live and what jobs they hold. They are trying to save money by being more precise in determining potential credit risks. It has gotten to the point where the lenders are denying credit to people who have never missed payments, nor done anything else that might mar their credit rating. Simply living in a certain geographic location or being employed with a certain type of business is making them high risks for lenders.

This phenomenon is happening with special frequency in the US states of Nevada, California, and Florida--the states that have experienced the three highest rates of home foreclosures during the last few months than anywhere else in America.

What types of consumer employers do credit card companies and other lenders consider a liability? The banks are, by and large, silent on the matter, beyond acknowledging that they do, in fact, use data about customers' employment and place of residence to determine credit-worthiness. Those working in finance and construction, in particular, appear to have been hit hard by lenders' new policies. These are some of the industries affected most by today's unstable economics and geopolitics.

Lenders are just as silent about which customers' geographic locations they deem high-risk. Discover Financial Services admits that it's stopping its policy of automatically increasing the available credit of customers with good credit ratings in certain parts of the country. The company will not say what parts of the country, presumably to protect its risk-assessment formulas from rival companies.

In short, if you work in finance or construction, or don't supply enough information about your place of employment to credit card companies, or live in part of the country that has experienced a lot of loan defaults and home foreclosures--be prepared. You may find your credit card denied, or the amount of credit available to you lowered for seemingly no reason.

What should you do if you find yourself in this situation? Trying to bargain with your lender is unlikely to yield results. Lenders are worried about losing money, and expect to lose more money, so they will try to hold to their new policies. Instead, the best option is to try to find credit with another company. The lenders all have different policies and formulas to determine what constitutes a risk--indeed, only 30% of banks are increasing their standards for credit-worthiness in this way, according to data from the Federal Reserve.