Credit Scores May Vary Among Vendors WASHINGTON – July 23, 2013 – By now, most of us understand the importance of a credit score. Mortgage lenders, credit card issuers and, in some cases, insurance companies use this measure of creditworthiness to determine availability and cost of their products. Some employers factor credit scores into hiring decisions. But the one aspect that has eluded even savvy consumers is how to get their credit scores. For advice, I contacted the woman known as the guru of credit scores, Linda Ferrari, author of “The Big Score: Getting it and Keeping it –7 Buying Power for Life,” (Consumer Power Press, $25). In her book, she explains that while credit scoring has been around since the 1950’s, it only became mainstream in the 1980s. The three rulers of the industry – Experian, Equifax and TransUnion – are for-profit companies that make money by collecting information about you from your creditors and reselling it to anyone who may want it … including you. In 1956, Fair Isaac & Co. created an objective scoring system to analyze consumer data. By 1991, all three credit-reporting agencies were using a FICO model to generate a number between 300-850 that quantifies an individual’s ability to pay back money borrowed. But you do not have just one credit score. Each reporting agency generates a different score using their data and their model. Lenders will typically pull scores from all three agencies, then choose the middle score on which to base their decisions. These scores can vary by as much as 100 points or more, says Ferrari. So how can you, the consumer, find out your score? “That is a question that is really complex to answer,” Ferrari says. Hundreds of versions of the three bureau-generated scores are sold to consumers and lenders by hundreds of different credit score vendors, Ferrari says. When you apply for a loan, you have no way of knowing which score is being used. Here Ferrari explains the four ways to access your score and how each one may be different: FICO score: Even though credit scores are referred to as FICO scores, you cannot get a true FICO score. You get a score generated from a modified version of a true FICO score. If you go to myFico or order your score from Equifax (which is 100 percent true to the FICO model) you can get the most realistic approximation of the score that most lenders use to make decisions. However, scores on myFico cost more than scores sold by many other vendors. Credit bureau score: All three credit bureaus sell credit scores to consumers, but in order to get a similar picture as lenders get, you would have to purchase your score from each of the three bureaus. Each bureau may offer to sell you scores from the other two, but know that Experian, for example, cannot sell you a real Equifax or TransUnion score because they are using their version of the FICO model to calculate it. Online score: Hundreds of online companies offer credit scores to consumers, but while the data comes from the same three credit reporting agencies, it often applies general criteria not designed for any specific use and therefore isn’t a good source to determine how a certain type of lender may view you. These scores are often most affordable, but they can give an incomplete picture. Lender scores: When you apply for any type of loan or credit, most lenders purchase scores from third-party vendors. When a lender requests your information, data is sent from the credit bureaus to the third-party vendor’s system which generates a score from each bureau. The scoring is based on whatever criteria the lender thinks is most important to their program. These scores are not available to consumers, but you can ask the lender to show you the score on which they are basing their lending decisions. © 2013 The Atlanta Journal-Constitution (Atlanta, Ga.) Distributed by MCT Information Services.
Posted on: Mon, 29 Jul 2013 03:19:39 +0000
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