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Financial
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Feature Article:
Credit Repair
Advice For Consumers -
FICO Credit Score Changes
Consumers need to know that as of February 14, 2009,
Experian based FICO scores and reports, previously available
at myfico.com, will no longer be available to consumers. As
Barry writes at myfico.com, "The change will be effective on
February 14th, 2009. While Experians decision eliminates
the consumers ability to see their own FICOฎ scores, it
will not impact your (lenders) ability to use FICOฎ scores
in your lending decisions."
Experts agree that FICOฎ scores are the most widely used
measure of consumer creditworthiness used by lenders in the
Unites States. FICOฎ scores are credit scores computed by
Fair Isaac Corporation using the company's proprietary
computational formulas. Fair Isaac Corporation uses the
credit information that Experian, Transunion and Equifax
compiles about each consumer and runs this information
through their complex formulas to arrive at three FICO
scores - one score per credit report.
Why is Experian's decision important to consumers? Those
individuals interested in augmenting their credit scores,
repairing their credit, or understanding how lenders are
making credit decisions about them, now have one less
reliable avenue through which to try to assess their credit
position prior to borrowing. If knowledge is power,
consumers now have even less power to understand their
credit score and if need be, understand that they need to
fix bad credit scores.
Before any appreciation can be gained about what this change
means in terms of consumer rights, it is important to
understand the limitations that already exist on a
consumer's ability to accurately assess their credit score.
The three major credit reporting agencies - Experian,
Equifax, and Transunion - each gather information about a
consumer and compile that information into a credit report.
A consumer recently gained the right to an annual, free copy
of these 3 reports. However, each of these CRAs use their
own credit scoring models, different from the model used by
Fair Isaac Corporation.
For this reason, consumers who wish to know what their FICO
scores are must request, and pay for, 3 FICO scores from
myfico.com. The reason for this is that each CRA compiles
their own, and often different, credit information on a
consumer. Each FICO score is based on one of the three CRA
reports, and the three FICO scores can differ by very
significant numbers. Learn about the information upon which
your
Fico score is based.
Many consumers incorrectly assume that the FICO scores they
retrieve from myfico.com are the same ones that lenders see
prior to assessing their creditworthiness and therefore, the
price they will pay for that credit. As of February 14, this
is not necessarily the case. Not only will consumers not
know what score (if any) is being provided based on Experian
credit data, they will not know if a lender is basing a
decision on one, two or three scores.
As Smartmoney magazine reports, Experian spokeswoman Sue
Henson describes Experian's relationship with Fair Isaac
Corp. as "not strategic" and refers to the scores consumers
access at myfico.com as "educational". She further points
out: "They are not necessarily by any means the scores
lenders are using.
What scores are lenders using? Good question. What scores
and/or credit reports should consumers focus on if they want
to heighten credit scores or repair credit? Good question.
The reality is that although a consumer can access their
credit reports from the CRAs once annually for free, the
scores contained on each of those reports are not FICO
scores. They are the scores computed using the 3 CRAs
different scoring methods. Only the scores provided by Fair
Isaac Corporation are real, genuine FICO scores. Consumers
must pay Fair Isaac Corporation to access their 3 FICO
scores - scores that are based on the information contained
in the three reports, but that can differ significantly.
What is a consumer to do?
Many consumer advocates are now suggesting that consumers
looking to access credit in any form ask the lenders to tell
them what score and information they are basing their
decisions on. If a lender finds this request too
challenging, tell that lender that you will not do business
with them for these very reasons and go elsewhere.
Outside of that, the best a consumer can do is to request
their free annual Experian credit report (along with the
other two - Transunion and Equifax). Study the report to
ensure that all information being reported is accurate and
up to date. If it is not, begin the steps involved to see
that it is corrected. This is the best a consumer can do to
attempt to ensure that their FICO scores accurately reflect
their credit worthiness. There is still no guarantee, even
if you pay for the 2 FICO scores you can still access, that
the scores you see are the same scores your lenders will
see.
Although every Credit Reporting Bureau compiles information
about each consumer and provides a credit score based on
their own scoring model, and Fair Isaac Corporation compiles
FICO scores using this data and their own credit scoring
system, learning as much as possible about how Fair Isaac
Corporation weighs general categories of consumer behavior
can provide a general guide to how consumers should approach
building good credit scores. Ensure that you understand what
information contributes to your FICO scores and start
building better credit scores now.
(c)
Nora Hansel
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