Are You Buying Your Real Credit Score?
Credit scores are how lenders, and even some insurers and employers, judge consumers. For a number that carries such influence, there are many grey areas that can create problems and confusion for consumers.
The July 2013 issue of Consumer Reports calls into question the value of consumers buying their credit scores. The reason? The FICO scores that millions of consumers buy each year for $20 are not the scores that car dealers, auto-finance companies and mortgage lenders use. The magazine reviewed the material that Fair Isaac provided to lenders, and concluded that the scores consumers buy are inferior.
Secrecy also adds to the mystery and frustration of credit scores that lenders actually use. Consumer Reports says that VantageScore is used by 1,300 lenders but there are various versions which can give very different scores. Fair Isaac sells 49 different FICO scores to lenders, but only sells two of these to consumers.
While consumers know little about credit reporting agencies, these agencies know much more about consumers than the number of credit cards you have or how much you owe on your mortgage. You may be surprised at the personal information collected by credit agencies and how many agencies are tracking your financial behavior. TransUnion, Experian and Equifax are the biggest nationwide credit reporting agencies, but there are many smaller specialty agencies that focus on specific industries. They collect and sell your information, providing reports that help determine whether you get credit, insurance and other financial services.
In November 2012, the Consumer Financial Protection Bureau released a list of 40 specialty reporting agencies. The CFPB warned these specialty credit reporting agencies that they may be violating federal law by not providing consumers with easy access to credit reports.
Here are some of the agencies and the information they collect:
- Chex Systems collects checking account applications, openings, and closures, including reasons for account closure. Many banks and credit unions will check this database before they approve a new account.
- Insurance Information Exchange collects motor vehicle records, including traffic violations and accident reports.
- L.N. (Clue Auto Report) provides information about an individual’s automobile insurance coverage and losses.
- CoreScore Credit Report collects property tax filings; rental applications and evictions; property ownership and mortgage obligation records; payday loan and online lending information; bankruptcies; liens; and child support obligations.
- National Consumer Telecom and Utilities Exchange collects information on new connect requests, account and payment histories, defaults, and fraudulent accounts associated with telecommunications, pay TV, and utility (electric, gas, water) services.
- CoreLogic Teletrak has databases on property taxes, flood and disaster risk, criminal background, and evictions.
- LexisNexis Screening Solutions Inc. collects tenant history information.
- Medical Information Bureau collects information about medical conditions and data from insurance applications.
Consumers should take advantage of getting free credit reports each year from the three main credit reporting agencies and checking for errors. This may minimize some of the problems with your credit score. You can get these free reports at AnnualCreditReport.com.