Can you have a favorite government agency?
For an underfunded and underappreciated agency, the newly created Consumer Finance Protection Bureau cannot be topped. While the CFPB was created in 2010 with the passage of the Dodd-Frank Act, the first director, Richard Cordray, wasn’t confirmed by the Senate until January.
The CFPB has been developed with a strong focus on protecting regular consumers. The CFPB has one of the cleanest and easiest to navigate websites I’ve ever seen for a government — www.consumerfinance.gov. They have simplified the consumer complaint process, making it easy to submit a complaint online, and the process has built-in timeline requiring a response from the credit card, mortgage company or lender and for resolving the dispute.
In September, the CFPB issued a report analyzing the difference between credit scores purchased by consumers and credit scores sent to lenders. Credit scores are vital in obtaining credit, and a lot of people shell out money to buy their scores, but what score are you buying? To make a sports analogy, you don’t want your credit scored like basketball, when your lender is using a football scoring system, and you certainly don’t want your credit scored like baseball.
The CFPB report noted at least five credit scoring systems:
• FICO — Score range: 300-850
• Vantage — Score range: 501-990
• Equifax Credit Score — Score range: 280-850
• Experian Plus Score — Score range: 330-880
• Transrisk New Account Score — Score range: 300-850
If the score ranges weren’t bad enough, the scoring systems are developed like the software programs (probably because that is what they are — software programs to calculate future risk.).
FICO is on version 8.0, along with different scores for car loans, house loans, credit cards and other specialized scoring versions. Your lender could be using FICO 4.0, the car version, and you’d have no way of knowing. The Credit Bureaus will sell you FICO scores, but they are FICO Generic (Like buying Microsoft NotePad instead of the full Office Suite sold to creditors).
The credit score can also vary depending on which credit report is run through the scoring system, because the data is not consistent across credit reports. If you have ever obtained a mortgage, you will see three FICO credit scores, one for each of the three main credit bureaus. Often lenders will do the high-tech solution of throwing out the high and low and going with the middle score. If you are thinking that credit scoring is starting to sound a lot like gymnastics and diving scores in the Olympics, you are probably right.
As a consumer or a business, the credit bureaus and scoring services require you to fork out cash for scoring.
The purpose of the CFPB report was to inform consumers about what they were buying and whether they can rely on the score. Imagine buying a score telling you the result of the latest sports score of your favorite team and being told it won. You madly celebrate, only to find out the other team won. According to the CFPB, about 20 percent of the time, the score you receive could be that wrong.
So what can you do to make sure you are scoring your credit the same way as the lender?
First, don’t even mess around with Vantage scoring. Very few lenders use Vantage; about 90 percent rely on the FICO score. If you are going to buy a score, make sure you are buying a FICO score and not a score generated by the credit bureau’s internal scoring. The credit bureaus make it confusing by selling both types of scores. You can buy directly from FICO at www.myfico.com, but that is only based only on an Equifax credit report, not Experian or Transunion. Better yet, talk to your lender on how it scores before you spend any money on buying a credit score.
For a copy of your credit report for free without the score, once a year go to www.annualcreditreport.com. For more consumer finance questions, check out the CFPB website.
E. Kent Winward is an Ogden attorney. He can be reached at
801-392-8200 or creditcorrection@gmail.com.
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