Credit
Scores No Longer
a Secret!
Do You 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 March 19, 2001 ,
Fair, Isaac and Co, the developer of the dominant
credit scoring system.- teamed online with giant credit
bureau Equifax to provide "FICO" scores (Fair, Isaac
and Co) -- 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.
The March 2001
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
http://www.equifax.com
or
http://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-http://www.qspace.com
and
http://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.
Distributed by
the Washington Post Writers
Group.
///
Respectfully
,
Bernie
Schwartz,
Finance
News Analyst - TVI Magazine
More
http://www.worthknowing.com
http://www.monitrust.com
http://www.equifax.com
http://www.transunion.com/FactBook/
http://www.myfico.com
http://www.qspace.com
Esperian=http://www.truecredit.com
http://www.experian.co.uk
http://www.experian.com
http://www.experian.de/
com/moneysecrets03
