Credit Scores No a Longer a Secret
Want to know your credit score? Now you can. And, better yet, you can also understand it.
Kept secret from home buyers and mortgage applicants for years, individual credit scores became readily available for the first time this week.
On Monday, the developer of the dominant credit scoring system-Fair, Isaac & Co.-teamed online with giant credit bureau Equifax to provide “FICO” scores and other personal credit information to consumers nationwide.
FICO scores are what the majority of American mortgage lenders use to evaluate home loan applicants’ creditworthiness. The scores are based on statistical models that analyze the electronic credit files maintained on virtually all adults in the United States and other countries.
The scores range from the 300s to around 850, with higher scores indicating lower risk. Many lenders reserve their most favorable rates and fees for applicants in the upper FICO score ranges-700 and above. Mortgage applicants in the low 600s and below get progressively higher rate quotes and are charged higher loan fees. FICO scores, in other words, often determine what you pay for the money you borrow.
Under long-standing contractual agreements among Fair Isaac and the three big national credit bureaus-Equifax, Trans Union and Experian-FICO scores were kept secret from consumers. But mounting consumer pressure-and state and federal legislative moves forced Fair, Isaac to rethink its policies late last year.
California mandated disclosure of credit scores to all borrowers who request them beginning July 1. Federal legislation that would do the same thing is pending in both houses of Congress.
This week’s launch of what the two sponsoring companies call the ScorePower service should eliminate the controversy over FICO score secrecy. For $12.95, charged on a major credit card, anyone can now obtain not only an Equifax credit report online, but a current FICO score--accessible for 30 days--plus personalized guidance on the reasons for the score.
The service also will provide a graphic representation showing how you stack up against all other borrowers, and give you specific recommendations on how you can raise your score.
A final feature of the service involves a toll-free number for you to speak with Equifax staff, who will answer questions about your credit profile and FICO score. At least initially, the service will be available only online, at either https://www.equifax.com or https://www.myfico.com. The two firms say they have taken extraordinary steps to make the new service secure from Internet interlopers or fraud.
To access your credit data, you’ll have to pass through what Equifax Vice President J. Michael Cummins called an “interactive identity authentication process.” The program asks a series of questions involving credit-file information-consumer loan balances, names of lenders, etc.-that only Equifax and the holder of the credit accounts would be able to answer.
The authentication system is sophisticated enough to screen out someone holding another person’s wallet, credit cards and Social Security number who is seeking illegal access to a credit file, Cummins said.
With easy access to FICO scores now a reality, how might consumers use them? Cheri St. John, Fair Isaac’s general manager, envisions a new level of consumer awareness about credit issues and improved management of household credit.
“What we are hoping is that this will allow people to proactively manage their credit,” said St. John. With the guidance available through the ScorePower service, people will know precisely how to raise their scores-by paying off balances on certain credit cards or even expanding their use of credit.
Although the new service is the first to offer the FICO score that lenders use in credit decisions, it is not the only online commercial source of credit scores. At least two other sites-https://www.qspace.com and https://www.worthknowing.com-offer other types of scores that analyze and quantify one’s credit standing. For some consumers, the other Web sites can be confusing. For example, a Washington, D.C.,-area homeowner recently obtained what she assumed was her credit score through the QSpace Web site, and was disturbed that it was much lower than the credit score she had heard about in a financing transaction several years earlier.
The QSpace score is not a FICO score-a disclosure found only in the fine print on the Web site. It is a generic score that a QSpace spokeswoman said can only emulate a real FICO.
The bottom line: At least for the time being, there’s only one source for the real thing-the FICO score your mortgage lender uses to evaluate you. Anything else may be interesting and even educational. But it may not be relevant in the real world of mortgage lending.
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Distributed by the Washington Post Writers Group.
