The credit crunch has changed how we view credit and lending. Many borrowers have
spent the past three years trying to figure out how convince lenders to loosen up the
purse strings. And, credit scores have dropped below 650 for roughly 35% of the U.S
population. It has certainly been a rough stretch.
However, one group of companies has done quite well during the same period of time,
the credit reporting agencies and their “B2C” divisions. B2C is the clever acronym for
“business to consumer”, meaning their consumer product divisions. These companies
have spent hundreds of millions of dollars to develop and market credit score related
products and services to consumers. And guess what…we’re buying!
However, in a recently released study performed by the newly formed Consumer
Financial Protection Bureau, it was identified that the scores that are being sold to
consumers by the credit bureaus are not the same scores being sold to lenders for the
purposes of underwriting loans. The CFPB went on to say that even if the scores being
sold to consumers were available to lenders, those aren’t the scores that are being
predominately used to make lending decisions.
The issue at hand seems to be the use of “educational” scores rather than the
actual scores sold to lenders. Educational scores are built for the purposes of giving
consumers a general idea of what their actual FICO scores could be and what could
happen to them based on the consumer’s credit management practices. These
educational scores are generally scaled close to 300 to 850, which arguably leads
consumers to think they’re actually getting their FICO scores.
The list of non-FICO scores sold or given away to consumers includes PLUS, Vantage,
TransRisk, CreditXpert, CE, and Experian’s National Equivalency Score. And while
some of those are commercially available to lenders, they collectively make up only a
small percentage of the total number of scores used by lenders. PLUS and CE aren’t
even available for lenders to purchase so they make up 0% of the score market, yet are
being offered to consumers, aggressively in many cases.
“The Credit Guru”, Longtime FICO Insider & Credit Industry Authority President Of The Ulzheimer Group, LLC
John Ulzheimer is a nationally recognized expert on credit reporting, credit scoring and identity theft. He is the President of The Ulzheimer Group, the Director of Credit Education at DisputeSuite.com, Credit Expert at CreditSesame.com and the credit blogger for Mint.com. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. He has served as a credit expert witness in more than 150 cases and has been qualified to testify in both Federal and State court on the topic of consumer credit.
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