Useless credit scores?
This is news to me, especially after I just purchased the 3 report package to start on a re-finance of my own home; I feel duped. But while discouraging, it is interesting to note that consumer reports says they believe many of the consumer paid scores are inferior to what lenders receive. Complete disclosure and transparency would go such a long way in fairness to consumers.
In the recent July issue, they tell the consumer not to buy the FICO score or any other. Why? They say the Fair Isaac score, and most of the others, are not reliable.
“But the FICO scores that millions buy each year for $20 a pop are not the scores that car dealers, auto-finance companies, mortgage lenders, and others use. Moreover, after reviewing materials that Fair Isaac provides only to lenders, we think the scores are inferior.”
They go on to explain that legislation has been introduced in March that would require free annual disclosure of scores that lenders actually use, which are ‘now typically kept secret’.
For the record, I am 100% in favor of complete disclosure.
It goes on to state that the Consumer Financial Protection Bureau also believes consumers shouldn’t rely on them to consider how lenders view their creditworthiness. Strangely, but significantly, in 20 to 32% of cases studied, “the consumer and lender scores rated the same credit file differently enough that the scores were one or more credit-quality categories removed from each other.”
So, I guess, the question is….why?
And then the next question is….until they pass legislation requiring identical reporting or something close to it, what is a consumer to do?
Something that is accurate by 68-80% sounds like it needs a lot of work. But it is better than having no knowledge at all. They recommend just getting your free annual credit reports from AnnualCreditReport.com, but stagger them, one every 4 months from each of the big 3 bureaus.