FICO next in line to offer
access to credit scores
Isaac & Co., the industry giant that has restricted consumer
access to credit scores for years, is now revealing the factors
that go into creating the number that lenders use most often to
rate a borrower's creditworthiness.
on the Web site for God and everyone to see more detailed and
comprehensive information than ever before on what a FICO score
looks at in a credit report," says Fair, Isaac spokesman Craig Watts.
If negotiations with the major credit reporting
agencies go well, the next step will be to provide consumers with
both the criteria and their scores, effectively ending the secrecy
that has traditionally surrounded them.
California-based Fair, Isaac is the creator
and owner of the FICO score, the mortgage industry's most commonly
used measure for determining credit risk. The mathematical model
factors such information as how much debt a person has, how much
credit is available on each of his cards, his past payment history
and how long he's had credit. The model distills the data to create
a single score that ranges from about 300 to 900; the higher the
number, the better the score.
Most scores fall in the 600s and 700s. Lenders
and credit card issuers are more likely to issue favorable terms
to customers with higher scores.
Look to the Web
Target date for offering the Web-based service is the end of July,
Watts says, if the credit bureaus will provide Fair, Isaac with
the raw data from which to derive the score.
"We're partners with the credit bureaus where
the FICO score is concerned; we're competitors in other areas,"
Watts says. "We're optimistic we'll be able to work out a relationship."
"They've asked us to sit down and speak about
that; we'll do that, no doubt," says Walter Rothschild, executive
vice president of marketing for Chicago-based Trans
Union LLC. "We're convinced this is helpful. The more information,
Until recently, most consumers didn't even know
the score existed, much less the factors that determine it or the
crucial role it plays in obtaining credit. That's because Fair,
Isaac's contract with the major credit reporting agencies -- and
by default, the lenders who use the FICO score -- prohibited releasing
the score to consumers outside of a lending decision.
The rationale was the score, developed for credit
decision-makers, was too complicated for consumers to understand
without a lender to explain the factors that go into determining
Consumer action speaks
In February, online lender E-LOAN
tested the waters by offering consumers their scores and general
information about the scoring criteria. More than 14,000 consumers
obtained their scores before Fair, Isaac exerted pressure on the
credit bureaus to shut off the information pipeline. The service
was discontinued in April.
At the same time, consumer demand for the information
was building. This spring, several developments arose to make Fair,
Isaac's position less defensible. Legislation was introduced both
in California state legislature and in Congress to require credit
score disclosure. Fannie
Mae, the largest provider of mortgage money, announced it would
stop using the FICO score in favor of its own model that would allow
disclosure, and TransUnion and Experian
announced plans to offer their own scores to consumers for the asking.
"There are other services out there that do
use computers to provide a thumbnail estimation of your credit standing,"
Watts says, "but you cut to the chase when you provide an evaluation
of the instrument lenders are using to make a determination."
After months of digging in its heels against
mounting criticism, Fair, Isaac's reasons for offering the information
"It looks as though legislation is inevitable,
whether at state or national level, for score disclosure," Watts
says. "We're also seeing a variety of initiatives to meet the perceived
consumer interest in more detailed information about their credit
standing. As the developer of the FICO score, we're in the best
position to provide the context and explanation for a consumer's
"We still think the lender relationship is the
best context for a discussion to help a consumer understand their
credit standing. The second best would be a credit explanation from
Fair, Isaac based on information in the credit report."
A land of educated consumers
A senior manager for the national trade association for the credit
reporting industry says the focus of all the new scores is right
where it should be -- on education.
"I think everybody is concentrating on the right
area," says Norm Magnuson, vice president of public affairs for
the Associated Credit Bureaus. "A score by itself means nothing.
A consumer says, '620 means what?' That's always been the dilemma.
How do you create the value underlying the score? You have to keep
coming back to the educational benefit."
Disclosure advocates in California welcomed
"We're delighted to see they're moving in that
direction," says Alex Creel, senior vice president of governmental
affairs for the California Association of Realtors, a cosponsor
of legislation -- that cleared the state senate almost unanimously
in May-- which requires lenders to disclose both credit scores and
the criteria. "We're glad we can be involved in pushing the envelope.
You certainly have a right to see something that could cost you
thousands of dollars."
With both the score and the factors offered
together, E-LOAN cofounder and chairman Janina Pawlowski considers
the move a positive step toward a model that will allow consumers
to more closely manage their debt.
"I see a time when you can do screens on the
computer and play, 'What if?'" Pawlowski says. "What if I wait seven
months for that item to go away on my report? What if I pay that
debt off? Will I qualify for more? That's where the Internet has
Of course, it's going to
Among the issues that remain to be decided is whether Fair, Isaac
will charge for the information. TransUnion will offer the score
it is creating and the score's determining factors for free with
a copy of a consumer's credit report, which costs $8. Experian has
not announced its pricing.
"We haven't decided pricing. We have some homework
to do on that," Watts says. "There are consumers who feel the score
belongs to them and they should get it for free. But realistically,
the score is an analysis of information in a credit report. Consumers
do pay for credit reports today, so there is some willingness to
pay for additional information."
The other question is whether the company will
offer the complete package of information on its site or somewhere
else, such as a participating lender or a credit bureau, where consumers
would be more likely to look for credit information.
"A lot of consumers are interested in an evaluation
in advance of a loan and they're less likely to go to a lender for
that," Watts says. "A neutral site seems to be the more likely way
to do that. We're talking to the credit bureaus about it. I doubt
that people would know to come to Fair, Isaac's site to look for
the information. We're not a household word. I don't know that we
want to be."
Pat Curry is a freelance writer
based in Georgia
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