Credit-Scoring Firm Reveals Details on How It Compiles Ratings

A leading credit-scoring company has revealed more information about how its numbers are compiled and said it may someday provide consumers with their scores, reversing a longtime policy of secrecy.

San Rafael-based Fair, Isaac & Co. published on its Web site Thursday a list of 22 factors that affect a credit score and gave general information about how those factors are weighted. The posting at https://www.fairisaac.com was in response to pressure from lawmakers and consumer advocates, who have called for more disclosure about how the scores are compiled.

The scores, which are typically kept secret from consumers, are three-digit numbers widely used by lenders to evaluate credit applications.

The Web site groups the factors into five categories, including past payment history, amounts owed, length of time credit has been established and the types of credit established. Although the company had published much of the information previously, the Web site reveals for the first time the relative importance of each category, with past payment history comprising 35% of the score and amounts owed comprising 30%.

Fair Isaac and other credit scorers have long resisted disclosing detailed information about how the scores are compiled, saying the scoring models are proprietary and that disclosure could compromise the scores’ effectiveness in predicting consumer behavior.

Company spokesman Craig Watts said Fair Isaac next hopes to offer a service to consumers that would provide them with their scores and with an explanation of how the scores were compiled. That, too, would mark a turnaround for the company: Two months ago, Fair Isaac pressured Internet loan broker E-Loan into dropping a service that provided consumers with their scores, saying it violated Fair Isaac’s contracts with credit bureaus and lenders.

Watts said at the time that the company didn’t object to lenders revealing the scores but believed the disclosure should be made only after a consumer had applied for a loan so that the lender could explain how the score was used.

California lawmakers responded by proposing a bill that would require disclosure, and credit bureaus Experian and Trans Union said they would create their own credit-scoring systems and release the results to consumers.

Watts said the service would require negotiations with those and other credit bureaus, since the company’s contracts forbid it from revealing the scores.

“There is this perception that consumers increasingly want to know their credit score before they go in to ask a lender for a loan,” Watts said. “We know we can make it work, so let’s just bite the bullet and do it.”