Credit card issuer Providian Financial Corp. plans to offer all its customers free online access to their credit scores, with tips on how to improve them.
The program, called "Real Information," allows cardholders to see their FICO credit score online. FICO is the most widely used score, which is computed from monthly credit data. Customers can plug hypotheticals into a score simulator to see how actions such as a missed payment or payoff of a balance can affect the score.
Customers can look at their scores anytime they like, as often as they like, at no charge. Customers will see the top two reasons why the scores are not higher. In addition, cardholders will be able to sign up for free e-mail alerts anytime their scores change by more than 10 points — an indicator of a possible identity theft credit crime.
Home mortgage and credit industry experts say that other lenders, mortgage servicing companies and banks are likely to jump in with competing programs, says syndicated columnist Kenneth Harney. That would be good news for potential home buyers, who can check their scores and improve them. High FICO scores mean low interest rates, and vice versa.
The program is part of an effort by the San Francisco-based company to revamp its business and reach out to "middle-American customers." Over the years, Providian marketed their cards to low-income consumers with imperfect credit histories. The strategy worked well during the late 1990s, but backfired as the economy sputtered and consumers defaulted on loans.
"We've been working on turning around the company for the last couple of years," said Warren Wilcox, Providian's vice chairman of planning and marketing, in an interview with Reuters. "One of the keys to turning around a company like Providian ... has to be done on the basis of solid customer relationships."
The company is also offering a "Real Rewards" program, in which cardholders can rack up points, not only for making purchases, but for paying bills on time or keeping a balance. The points can be redeemed for gift cards at selected retailers or restaurants, or for a lower interest rate, or to pay an over-limit fee.
"It was created intentionally to really meet the needs of mainstream, middle-American customers," Wilcox said. He estimated the size of the "Middle American" market at roughly 40 million to 50 million people. Providian currently has 10.5 million customers, Wilcox said.
Robert Hammer, chairman and chief executive of R.K. Hammer Investment Bankers, which follows the credit card industry, told Reuters that the programs Providian unveiled last week are not new. They’ve been around for five or 10 years. What’s new is their inclusive focus.
"The difference is it's always been offered to blue-chip customers, but not necessarily to subprime customers or middle Americans," he said.