Once-secret credit scores now for sale
By Holden Lewis • Bankrate.com

Equifax, the giant credit bureau, is selling once-secret credit scores to consumers.

For $12.95, consumers can order Equifax credit reports online and get their credit scores, computed by Fair, Isaac & Co. A credit report without a credit score costs up to $9 when ordered online.

Equifax is the first of the Big Three credit bureaus to sell credit scores directly to consumers. TransUnion and Experian plan to do so later this year.

If you know your credit score, you can shop smarter for loans. If you find out that your score is just below the cutoff point for a better interest rate, you can do something -- such as closing an inactive credit card account -- to improve the score and qualify for better borrowing terms.

Credit scores are important because lenders usually don't view your credit report when you apply for a loan or a credit card. Instead, they look at your credit score to decide whether to extend credit to you and on what terms. The score is a numerical summary of the credit report, based on a formula developed by Fair, Isaac.

• The SAT score helps determine whether you go to Harvard or a community college.
• The credit score helps determine whether you get a loan from a regular bank or a company whose late-night TV ads are sandwiched between spots for dial-a-porn services and greatest-hits CD packages.

The long arm of regulation
All three national credit bureaus are required by California law to disclose credit scores to Californians by July 1, and they have decided that it would be easier and cheaper and more lucrative to sell credit scores nationwide rather than just to Californians.

For their money, consumers who order Equifax's "Score Power" get what's known generically as a FICO score, a number between 300 and 850. The higher the score, the more creditworthy the consumer is deemed.

Experian plans to sell credit scores by July 1, along with a program that will allow consumers to see, in real time, how their credit scores would be affected by closing accounts, paying off balances and applying for new loans. Equifax and Trans Union don't do anything nearly as sophisticated as that, although they explain in general terms how a score was calculated and what steps a consumer can take to improve it.

The credit bureaus have their own names for the scores when they market them to lenders. Equifax calls it a Beacon score, Experian calls it an Experian/Fair, Isaac Risk Score, and TransUnion calls it an Empirica score. Many people in the lending biz just call them FICO scores.

Lenders use the scores to decide whether to lend money and on what terms. A mortgage broker, for example, might turn down anyone with a score below 550, lend money at a high interest rate to people scoring between 551 and 600, and at lower rates for applicants scoring higher.

Generally speaking, 640 and higher is considered a pretty good score.

For years, credit bureaus kept scores secret from consumers because Fair, Isaac didn't want to open the door to competitors, and it didn't want consumers to figure out how to hack higher scores. But when California mandated that credit bureaus disclose scores to Californians, the credit bureaus embraced the concept of selling credit scores to consumers for a fee.

The credit bureaus also will comply with another California mandate that requires them to disclose the top four "reason codes" that explain, essentially, why a score isn't higher. Reason codes will explain that you are penalized for making late payments, or are borrowing from a finance company rather than a bank, or because you have too many credit cards or too many accounts with balances or too many accounts without balances.