Experian curbs FICO score sales
Hoping to buy his first home this year, Ralph Bustamante paid off his credit cards and cleared dings on his credit report to ensure that he’d be able to get a loan.
Bustamante had hoped to pull his FICO scores, used by most lenders as a standard of creditworthiness, from the three major credit bureaus so he could negotiate the best possible mortgage rate.
Make that two credit bureaus. One of the companies, Experian Group Ltd., will stop selling FICO scores to individual consumers Saturday. Instead, it will sell FICO scores only to commercial customers such as lenders.
That could put home buyers such as Bustamante at a disadvantage, consumer advocates say. That’s because a lender will have access to his Experian FICO score, but he won’t.
“If the lender pulls the Experian number, it might end up being an unexpected deal breaker,” said Bustamante, 28, of Las Cruces, N.M. “And all my hard work would go to naught.”
Experian Executive Vice President Peg Smith downplayed any disadvantage to consumers, saying Experian will still offer individual customers its own credit rating scoring system.
Most lenders, however, use the FICO scoring system developed by the Minneapolis-based Fair Isaac Corp., which rates an individual’s creditworthiness on a scale of 300 to 850, noted Ken Lin, chief executive of Credit Karma, a free score-tracking service.
Experian clearly hopes to establish a rival to the famed FICO score, Lin said.
“FICO is the branded, premium credit score, the Kleenex to the hundreds of other tissues,” Lin said. “This is Experian getting a leg up on that.”
Experian, which is based in Ireland and has U.S. headquarters in Costa Mesa, sells its own proprietary PLUS credit score. It also sells a VantageScore ratings system that it developed with the other two credit bureaus, TransUnion and Equifax Inc.
Consumers are entitled to one free credit report each year from each of the credit bureaus at annualcreditreport.com. This report includes such information as bank account balances and any late payments on credit card debts.
The FICO score costs extra. It will remain available from both Equifax and TransUnion for $15.95 from the myFICO.com website. Today is the last day all three scores can be bought at that site.
Most personal finance experts recommend having the FICO score, saying that information makes it easier to negotiate the best rate on a loan.
With loans harder to get, consumers need to match their financial data as closely as possible with the data being used by lenders, said Emily Peters, a personal finance expert for consumer website Credit.com.
Shon Dellinger, vice president of myFICO.com, said some people might apply for loans just to see their Experian FICO rating. But he warned that doing so could lower their scores, since repeated requests for a credit report is considered one sign of shaky finances.
“Consumers are strapped, so to remove a very valuable tool for them couldn’t have come at a worse time,” Dellinger said.
Stuart Reeves, a 60-year-old biochemist from Cedar Rapids, Iowa, says he wants to know what each of the credit bureaus is saying about his creditworthiness.
“Now I’m bereft of a third of the terribly important information I need to make all my financial decisions,” he said.