New assault on your credit rating: subprime credit scoring.(Buyers Guide)(Industry Overview)

If you walked into a CitiFinancial office in Middletown, N.Y., in October, you could have taken out a home-equity loan with an annual interest rate of anywhere from 10.5 to 18 percent. You'd have to go through the trouble of applying for a loan to find out which rate you'd actually pay, and the rate would hinge on your credit score. Your credit score is a three-digit number generated by credit bureaus based on your debt profile and bill-paying history. CitiFinancial knows your credit score--but it doesn't have to tell you. Unfortunately, there's a lot more you likely wouldn't know.

You wouldn't know whether the interest rate is higher than you deserve to pay. You wouldn't know whether other lenders might have judged your creditworthiness differently; each interprets credit scores independently, and they, too, can keep that information from you. And you probably wouldn't know that CitiFinancial is owned by the same company that owns Citibank--and that you might pay thousands of dollars less for the same loan if you got it from Citibank.

Outrageous? You bet it is--for everyone who borrows money. If you don't know a key driver of your interest rate, you can't know whether you're getting a fair price.

This setup is even more harmful to consumers who have a few blemishes on their credit report. Don't assume you're not counted among those "bad apples. "Over the last few years, lenders have figured out that they can make major profits out of minor credit missteps by branding mostly diligent borrowers as "subprime" and jacking up their interest rate. Even consumers with "prime" credit scores have been subdivided into a range of rates.

This is only the latest twist in a long-running game of "Gotcha!" that lenders have been playing since the early 1990s. They relaxed the old standards of sound lending by luring consumers into debt waters well over their head, but they didn't relax the old strict standards of loan repayment. The result: Easy-money lenders point fingers at the subprime class they helped create, then punish those borrowers with significantly higher interest rates and fees. College students--and now even 16-year-olds--are a new target for subprime lenders.

Meanwhile, mainstream banks have adopted some of the practices normally associated with subprime lending for all their customers. Some big credit-card issuers have shortened billing cycles from 25 to 20 days, making it harder for customers to get their bills in on time, according to national surveys by Consumer Action, a San Francisco-based group. And card issuers are more closely monitoring bill-payment performance. Slip up, and you can get quickly hit with late fees and penalty interest rates. The interest rate on the Wells Fargo Platinum MasterCard can quadruple to 24 percent if payments are not kept current.

With the help of sophisticated credit-scoring models, lenders are rummaging deeper into consumer backgrounds, enabling them to reclassify some formerly prime customers as subprime. The benefit to the lender: increased profits.