How Credit Agencies Sell Fake FICO Scores
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Recently I checked my FICO score. I was checking my credit report and they offered a FICO score for only $7.95. What a deal, and I have to tell you I felt great when I saw the number as it was a good deal higher than I expected.
Then I saw this article over at the Miami Herald about how the credit agencies are selling fake FICO scores that can mislead a consumer that they are in better shape than they are.
A mortgage applicant says, ”Oh, I’ve already checked my credit score online.” Then the loan officer pulls the home buyer’s FICO score and finds that it’s 50 or 100 points lower than the generic credit score the applicant quoted.
”This is becoming a real problem — a lot of people simply don’t know the difference between FICO scores and other scores,” says Ginny Ferguson, immediate past chairperson of the National Association of Mortgage Brokers’ credit-scoring committee and co-owner of Heritage Valley Mortgage of Pleasanton, Calif. “They think it’s all the same.”
FICO scores, developed by Fair Isaac Corp., are the predominant credit measure used by the mortgage industry. The scores run from 300 to 850 and are used to predict a borrower’s likelihood of future nonpayment, with higher scores indicative of better creditworthiness. via the Miami Herald
If you are serious about checking your real FICO score, there is only one place to find it: Fair Issacs website, myfico.com. The site is not cheap, they charge 80 dollars a year for 2 reports and 11 dollars after that. But if you are looking to make a major purchase or looking to improve your credit, this is a good investment.
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Comment by Dan Green on 23 May 2006:
Great article! Part of the problem is that consumers don’t always know what purpose credit scores actually serve. Credit scores were originally developed to determine the likelihood of default on a mortgage.
Over time, credit bureaus developed new products to sell to consumers, but they never reveal to the general public that the “new and improved data” is irrelevant to mortgage companies.
I wrote about this problem when discussing the newest credit bureau product — VantageScore (http://21stcmb.typepad.com/the_mortgage_reports/2006/03/vantagescore_a_.html).
Using VantageScore as a substitute for FICO is like using ACTs to apply to a college that uses SATs. The measurement just doesn’t mean anything to the decision-makers.
So, I am not sure if the data being sold is fake as much as it is worthless.