| So Many Scores Credit scores can be confusing. FICO, TrueCredit, PLUS, Beacon, and Empirica scores are all in daily use. Why are there so many scores? A nationally recognized credit repair expert ex... |
| |
|
So Many Scores
Credit scores can be confusing. FICO, TrueCredit, PLUS, Beacon, and
Empirica scores are all in daily use. Why are there so many scores? A
nationally recognized credit repair expert explains the different
scores and how they can impact your life.
FICO, the Score that Counts
There are many credit scores available, but the FICO score is the
one that matters. FICO, by the way, is an acronym for Fair Isaac &
Company, the creator of the scoring model. Virtually all lenders use
FICO scores to make loan decisions. If you are in a credit repair
program, any score you monitor is fine for measuring progress. But if
you are planning to apply for a loan the FICO score is the one to
watch.
FICO and Your Lender
When you apply for a loan, the lender orders your credit report
from one (or more) of the three credit bureaus, Experian, Equifax, and
TransUnion. Each credit bureau report comes with a FICO score. If you
speak with your lender about your credit, they are likely to refer to
each of your scores using the specific credit bureau name.
The Credit Bureau Illusion
Given the constant association of FICO scores with the three credit
bureaus, you might assume they have some proprietary claim on the
scores. You might also assume that if you purchased your scores from
the credit bureaus, you would get the same FICO scores the bureaus sold
to your lender. You would not be alone. In the credit repair business,
we find most of our customers make the same assumptions. The
assumptions are wrong.
Credit Score Re-Branding
As an aside, I should mention that the three bureaus have
re-branded the FICO scores they sell to lenders. Equifax calls it a
Beacon score, TransUnion calls it an Empirica score, and Experian calls
it an Experian Score. Different names, but they are all FICO scores.
Our credit repair customers often ask about numeric differences in the
scores. Numeric differences arise because each bureau gets information
from a slightly different mix of creditors. Timing also plays a roll in
score variance; a recent change in your credit may be picked up sooner
at one bureau than another.
The Business of Credit Scores
As it happens, the credit bureaus don’t own the FICO scores, nor do
they sell them directly to consumers. Fair Isaac & Company owns the
scoring model and licenses it to the credit bureaus. The credit bureaus
use the model to score the data they have on file for consumers. Then
they bundle the scores with consumer credit reports and sell them to
lenders. Fair Isaac collects royalties from the credit bureaus for
these sales.
Putting Credit Scores to Use
If you are planning to apply for a loan, you might want to purchase
your FICO scores beforehand. You would want your real scores, not
“estimated” scores that might vary widely from the ones the lender will
use. Yet “estimated” scores are exactly what millions of consumers get
every year when they visit the credit bureau’s websites. Many of these
consumers go on to apply for a loan, and are disappointed when the
lender tells them that their scores are lower than they were led to
believe. We hear this story almost every day from people starting up
their credit repair effort.
Estimated Scores
Fair Isaac would have been happy to have the credit bureaus sell
FICO scores directly to consumers. The credit bureaus, however, seeing
the opportunity, developed their own “estimated” credit scores rather
than paying royalties to Fair Isaac. Equifax, the exception, offers a
FICO score to consumers, which provides an economical way for
consumers, or anyone in a credit repair program, to monitor their
score, but on its own does not provide a complete solution.
Experian’s PLUS Score
Experian sells a credit score at their website called the “PLUS
Score”. Here is the small print from their website, “Your PLUS Score is
formulated using the information in your credit file. It is modeled
after the hundreds of commercial credit scores that help potential
lenders, landlords, and employers quickly gauge your credit history and
decide what kind of a risk they might be taking if they approve your
application.”
TransUnion’s TrueCredit Score
TransUnion sells a credit score called the “TrueCredit” score. Here
is the small print from their website. “TrueCredit” is not connected in
any way with Fair, Isaac and Company; the credit score provided here is
not a so-called FICO score. The credit scores of TransUnion may not be
identical in every respect to any consumer credit scores produced by
any other company.”
Equifax FICO Score
Equifax, as mentioned, makes a FICO score available to consumers.
If you are in a credit repair program, or planning to apply for a loan,
this is the most economical way of seeing a real FICO score. But it is
important to know that many lenders, and almost all mortgage companies,
look at all three of your FICO scores, and base their decision on the
value of your middle score. One score is simply not enough.
Myfico.com the FICO Source
So, if you want to know where you stand prior to applying for a
loan, or to monitor your credit repair efforts for each credit bureau,
you will need to see all three FICO scores. These are available at
myfico.com, The Fair Isaac website.
Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.
|
Jim Kemish, a nationally recognized credit repair and restoration
expert, is the president of Sky Blue Credit, a leading credit repair
business since 1989. For more information visit http://www.skybluecredit.com
|
|
| Search Articles |
 |
|
|
|
| Investing
Resources |
|
|
|
|
|
 |
