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Fred Williams

Free credit scores bill floating in Congress

You're entitled to a free copy of your credit report -- why not your credit score?  That's the question posed by a bill introduced this month in Congress.

Sen. Bernie Sanders of Vermont has introduced a measure that would give people free access to their credit scores.The three-digit figure, typically ranging from 300 to 850, is the key to your chances of getting a credit card or a loan at a good interest rate. Beyond that, it is also becoming increasingly important for finding a job, car insurance, or a place to live.

Aren't credit scores free already? Not quite. Under the U.S. Fair Credit Reporting Act, you are entitled to a free copy of your credit report, not your credit score. The report is the file of raw data showing your credit history -- who you've borrowed from and your repayment history. Your credit score is the number distilled from that credit report data.

The score offered by Experian through a subsidiary website called "FreeCreditScore.com" is an "educational" score, not what lenders see, according to the site's terms and conditions. And if you're not careful it isn't free, either. You need to enter your credit card number to see your educational score, then remember to cancel the $7.49 monthly service, while avoiding the upsell buttons that lead to more expensive options. It's like playing a round of Frogger that will ding your credit card if you miss a hop. The only way I found to cancel was by calling the customer service number, which was relatively quick, but not as convenient as the online sign-up process was.

An authentic credit score that's really free looks like an idea whose time has not yet come, however. The companion measure to Sanders' bill faces rough sledding in the House of Representatives. All 12 of its co-sponsors are Democrats. And the Financial Services Committee, where the bill is parked, seems more interested in scheduling hearings about Fannie Mae and Freddie Mac, according to a legislative aide for U.S. Rep. Steve Cohen, D-Tenn., the main backer of the measure in the House.

The Free Access to Credit Scores Act's prospects are "probably not bright in this Congress," admits Cohen aide Michael Fulton, with the emphasis on the word "this." But if the bill at least gets a hearing, the event would serve as a forum to air the question of why your credit score -- derived from your credit report data and critical to your financial picture -- isn't free the way credit reports are.

"Entities are collecting information about you and you can't even get it, unless you pay for it," said Pamela Banks, senior policy council at Consumers Union, the advocacy arm of Consumer Reports.

The idea has languished in previous sessions, but this time Consumers Union is getting behind it with a campaign, Banks said. More than 60,000 people have sent messages to lawmakers through an online petition drive so far.

Credit scoring giant FICO, which invented credit scores, also thinks it's a good idea for consumers to have their real scores, rather than educational ones. Credit reporting agencies license FICO's methods when they provide credit scores to lenders.

"We agree that consumers benefit most when they have access to credit scores that are used by their lenders," Anthony Sprauve, FICO director of public relations, said in a statement.He noted that the Consumer Financial Protection Bureau found in a study that educational scores are substantially different from what lenders see about 20 percent of the time. FICO isn't entirely behind Sanders' bill, however. Requirements that scores be kept on file would be burdensome to lenders, Sprauve said.

The bill would require credit scores from the major reporting agencies, Experian, Equifax and Trans Union, to be included in the free annual copy of your credit report to which you are already entitled under the FCRA. It would also provide access to all scores generated in the previous year and stored in consumers' credit files.

In a statement, Experian said that the credit score provides only a general understanding of creditworthiness, and a fuller picture is already available on your credit report. What's more, lenders will take into account other factors not included in your credit history, such as your collateral and stated or estimated income. They may even use their own, internally generated score before making a loan decision. More than 30 million people have obtained free credit reports through www.annualcreditreport.com, the company added.

Banks of Consumers Union, however, argued that consumers ought to have access to the same number that lenders see.

"It's as if you were a student taking the SAT and they sent you a score, then they sent the real score to colleges and universities," she said. "You would be at a disadvantage."

1 Comment(s)

SD said:

It's so frustrating that people overreact to things they don't understand.

The very last statement of this post, about the practice amounting to SAT scores being sent wherever, is a joke. SATs are a standardized test, while credit scores are anything but. This latest bill doesn't address the underlying issue: whether consumers are evaluated by a particular standard or not. (Disclaimer: I do work for one of the 3 major bureaus). I'd argue that this bill won't accomplish what consumers are hoping for, because each lender has it's own criteria besides using credit scores, and as acknowledges in this post, many lenders use different and sometimes internal scores. So what, a lender has to reveal their business criteria and modeling calculations so a consumer can understand why their credit wasn't good enough?

As I said above, I think consumers and lawmakers are overreacting. I do agree and understand that consumers do need a decent understanding of how they're evaluated, but...to a certain extent, how they're evaluated by different lenders is proprietary to what the lending business is about. It should be audited for regulatory compliance, but I don't think the consumer should dictate things they don't understand that others do.


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