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Settling the ‘Score’

Consumers are more conscious of their finances than ever before. Want to see the evidence? Just turn on your television and watch the array of credit report and score products being advertised on commercials while you’re watching your favorite primetime shows. Little do many people realize, however, that ‘Freecreditreport.com,’ ‘Creditchecktotal.com,’ ‘Freecreditscore.com,’ ‘Truecredit.com,’ and many of the other well-known consumer credit report and score services are actually owned by the major credit bureaus themselves.

Most people don’t see a problem with this scenario. After all, Equifax, Experian, and TransUnion are the best repositories for consumer credit information–which means the information they supply is necessarily accurate, right? The fact is, that’s only partially true. While we at American Leasing & Financial will always advocate that customers view their credit reports frequently and stay on top of their information, we’ve begun to notice a concerning pattern that seems to be impacting a lot of consumers in a negative way.

Consumer credit scores are a dime a dozen. That is to say, there are no less than thirty major credit scoring models being pawned off as ‘your credit score.’ There are a variety of ways to ‘score’ a credit report, but the number most consumers see when they make buy their credit score from the major credit bureaus is almost never the same number we see as lenders on the other side of a financial transaction. One of the most common scores consumers buy is their ‘Plus’ score, a score originally created by Experian themselves. The Plus score, for all intents and purposes, is supposed to do the same thing as the FICO score: it measures a consumer’s creditworthiness. Unfortunately, it does so in some very different ways.

For starters, the Plus model ranges from 330 to 830 (as opposed to the 300 to 850 range espoused by the scores we use.) In addition, the mission statement of the Plus score is mostly educational in nature. Experian’s executives call this being ‘consumer focused.’ The reality is that by using a different scale and placing different weights on categories, consumer’s get a skewed (at best) view of their credit score. The Plus score has often been the culprit when customers call and tell us they have a 680 credit score, and we pull their credit only to find a 560.

Still other scoring models like the VantageScore model go all the way up to 990. Suddenly, a 700 credit score doesn’t sound so good, does it? We are constantly trying to educate consumers on the basics of credit scoring. Most lenders, even those in the commercial finance business (like ourselves) utilize FICO scoring models, created by a company called Fair Issac Corporation. Thus, to guarantee you’re looking at a score as close as possible to what a potential lender might see, you should only pay for a FICO score. FICO scores are available for purchase here. Recently, a new amendment to the Dodd-Frank legislation that passed last year has made it the law that any lender that denies a consumer for credit or charges a higher-than-normal interest rate is required by law to provide that consumer with their FICO score. You can read more about that in this article.

To learn more about the factors that impact your credit score, check out our free e-book.