With ever growing databases and analysis capacity, the use of data mining is expanding.  In a previous post we spoke about the Obama campaign’s use of data mining.  I recently heard this report on NPR’s Marketplace about credit card companies’ use of data mining to develop risk criteria.

Credit card companies, always known for their data analysis, are getting into the act by assessing risk with more than just your specific financial history (e.g. income, payment history, other debt, etc.).  Now they’re looking at the type of places you shop (if you shop at deep-discount stores you may be a higher risk) and where you live (likewise if you live in an area with a lot of foreclosures).

On the one hand, this may be considered a smart use of available data (I’m presuming a great deal of analysis has been done prior to actually link these attributes to risk) and, the argument could be made, it would be irresponsible for a company to not use everything it can to reduce its risk, especially in this economy.  On the other hand, it could be considered as overreaching and as an invasion of privacy.  As is often the case when using statistics to make a judgment about an individual case, there is the squeamish issue of judging an individual, in part, by others’ actions.

What do you think?  A good use of data or an unethical one?