Consumers lose access to major credit score
Experian cuts off consumer access to its FICO scores
By Jeremy M. Simon | Updated: February 14, 2009
Consumers have lost access to a key version of the credit score many banks use to make lending decisions.
On Feb. 14, 2009, the credit bureau Experian ended an agreement with FICO score creator Fair Isaac Corp. that allowed consumers to buy the FICO score calculated from Experian's database of consumer payment behavior. Lenders retain access to consumers' individual Experian-based scores and will continue to use them to decide whether to offer loans and on what terms. That means lenders will make loan decisions on the basis of credit scores that consumers can't see.
For six years, a deal between the two companies enabled consumers to purchase their Experian-based FICO score online. Early in February, 2009, however, Fair Isaac revealed Experian's plans to end their deal .
Access to FICO scores helps consumers because it allows them to see the same data lenders use when deciding whether or not to approve them for a mortgage, credit card or other loan. That's important because consumers can learn how lenders view their credit history and can take action to better their scores. Better credit scores improve the odds of getting a loan and of getting a lower interest rate and lower payments.
Since the companies have severed their arrangement, Experian FICO scores will only be available through institutions with whom consumers have applied for a loan and through a select few financial institutions with whom Experian has made individual distribution deals.
Under the Fair Credit Reporting Act, credit bureaus are still required to provide a free credit report to consumers upon request once every 12 months, so borrowers will still have access to the underlying data used in the calculation of their Experian-based FICO score. A credit report is the raw data that chronicles loan payment behavior; a credit score is a three-digit number distilled from a credit report.
At the end of the day, we don't believe any consumers are disadvantaged here.
Pulling the plug on a popular score
The FICO credit score is the metric lenders generally consider when deciding whether to extend credit to potential borrowers."Most lenders do use FICO scores," says Peg Smith, executive vice president with Experian. FICO scores come in three forms, with each version of the score generated using the data collected by one of the three main credit bureaus -- Experian, Equifax and TransUnion. Experian is the largest provider of consumer credit scores, with 9 million consumers having signed up for its credit reports and scores, Smith says.
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"Consumers are very upset that they are losing the ability to predict what their Experian score is without making an application to a lender," says Linda Sherry, national priorities director for nonprofit consumer rights group Consumer Action in Washington, D.C. Another consumer group says the move could lead it to possible action. "We're seriously considering some kind of protest beyond mere criticism," says Steve Brobeck, the executive director of advocacy organization Consumer Federation of America.
Experian says that earlier news reports on the decision may have left some borrowers bewildered. "We probably have consumers that are confused" about the reasons for the change, Smith says.
As to why it would pull back on consumer access, Experian says its decision is entirely commercial. "The nature of the relationship has changed between Fair Isaac and Experian," says Smith, a 32-year employee of the credit bureau. Experian says it found the terms of a new agreement that would change how lenders get FICO scores "very unreasonable," Smith says. That prompted a re-evaluation by the credit bureau."It did make us step back and look at the total agreement with Fair Isaac," Smith says.
In response, Experian decided to renew the old contract that dictated how lenders access FICO scores, rather than accept the terms of the new contract. Additionally, the credit bureau decided to terminate the portion of its agreement with Fair Isaac that made scores available to consumers via myFICO.com.
Consumers are very upset that they are losing the ability to predict what their Experian score is without making an application to a lender.
Experian sees consumers as mostly unaffected
Experian downplays the impact of the canceled agreement with Fair Isaac, calling it largely overblown. "At the end of the day, we don't believe any consumers are disadvantaged here," Smith says. According to Experian, only a limited number of consumers accessed their Experian-based FICO scores through the myFICO.com channel.
Not so, says the FICO score's creator. Although Fair Isaac doesn't break down its numbers by credit bureau, Watts says that to date, myFICO.com and its affiliates have provided consumers with over 23 million FICO scores from all three credit bureaus. Those scores are key to consumers because of their popularity with lenders. Watts says that in 2008, U.S. lenders bought more than 3 billion FICO scores from Experian, Equifax and TransUnion, calculated using the same formula that provides the FICO scores sold by myFICO.com to consumers. "Obviously the FICO scores from myFICO.com are directly relevant to each consumer's credit situation and credit potential," including the now-gone Experian-based FICO scores, Watts says.
Despite Experian's decision, Smith says that consumers still have options. "Don't believe there is only one score out there," she says. Other scores used in the lending process include Experian's BankruptcyPredict bankruptcy score, as well as the VantageScore credit scoring product created jointly by Experian, Equifax and TransUnion. Unlike FICO scores, which can vary from one bureau to the next, Experian says VantageScore uses the same algorithm across all three credit bureaus, making its uniformity a great choice for lenders.
Still, while some lenders use VantageScore to gauge a borrower's creditworthiness, a far greater number rely on the FICO score. As long as VantageScore remains less used by lenders, its importance to consumers hoping to improve their ability to borrow will also remain diminished. Smith dismisses the idea that the decision to end the arrangement with Fair Isaac could be an attempt to bolster the position of VantageScore. "In no way does this decision have to do with VantageScore," she says.
Though consumers have lost the ability to buy the Experian-based FICO score, homebuyers may request one from their mortgage lenders, Smith says. Watts is wary of relying on that approach. "Consumers can ask for anything they want, but lenders are under no obligation to satisfy them," he says.
A few lenders have arrangements in place that enable them to provide the Experian FICO scores to their borrowers, including customers of the Pennsylvania State Employees Credit Union. Experian was unwilling to provide the names of the other lenders with similar agreements, citing confidentiality.
Other credit bureaus
One of the other credit bureaus says it remains committed to consumers' online access to its credit scores. Steve Katz, director of the consumer brand for TransUnion, says the credit bureau's relationship with Fair Isaac remains "unchanged." Equifax did not provide comment on its plans.
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