By Mitch Lipka
May 13 Credit scores were long something that
lenders got to see and consumers only found out about later.
Now, pretty much anyone can take a look at their credit scores
whenever they want to, but it's not clear which of those scores
matter. And most scores that consumers see for free are not the
same ones bankers are using to weigh customer creditworthiness.
Consumers remain confused by credit scores, the Consumer
Federation of America reported on Monday. That is not
surprising: With dozens of scores on the market, it's hard to
figure out which ones count and what they mean. "It can be very
confusing because there are just so many scores," says Stephen
Brobeck, the federation's executive director.
A credit score is a numerical "grade" produced when the
information on a credit report is run through a computer model,
and lenders use them to judge creditworthiness of loan
applicants. Borrowers with high scores typically are offered
loans at lower interest rates.
Yet about 40 percent of those surveyed didn't know credit
card issuers or mortgage lenders use credit scores to determine
who gets credit and at what rate. And about 40 percent also
responded, incorrectly, that age and marital status were part of
the credit score calculation.
The multitude of scores doesn't help. There are more than
200 specialty scores currently offered to lenders. The scoring
models differ from each other, and they are based on credit
histories collected from the three market-dominating credit
bureaus: Experian, TransUnion and Equifax.
Consumer-focused ads touting "free" scores are ubiquitous.
But not all scores are created equal and consumers who depend on
the wrong "free" score can hurt themselves financially. Thomson
Reuters compared several of the more popular scores to see which
ones were best for consumers, and found real discrepancies among
FICO STILL KING
The vast majority of credit scores used by lenders -
consulting firm Tower Group estimates it to be about 90 percent
- are FICO Scores calculated and sold by Fair Isaac Corp. Nobody
gives them away for free; you can buy two different versions of
FICO scores (based on two different credit reports) for about
$20 apiece from MyFico.com.
Even the scores that appear on MyFico.com may differ from
specialized FICO scores sold to different kinds of lenders. An
auto loan score might be different than a mortgage score, for
example. The scores sold to consumers through FICO's myFICO.com
site give "a very good approximation of any other FICO Score
their lender may be using," said Anthony Sprauve, a spokesman
But other websites, such as CreditSesame.com and
CreditKarma.com offer free scores that don't claim to be FICO
scores but do aim to be calculated in a similar way and are on
the same 300-850 FICO scale.
What consumers can see on these sites tell you "what your
score is likely to be or darn close to it when you're applying
for a loan -- and that should be good enough," says John
Ulzheimer, president of consumer education at SmartCredit.com.
Credit Sesame uses scores provided by Experian and Credit
Karma uses scores from TransUnion.
Several other sites, including Quizzle.com and
FreeCreditScore.com use what they call an "educational score"
that is based on Experian data, and is on a different scale than
the FICO scores. (FreeCreditScore, by the way, offers the 'free'
score as a benefit to consumers who sign up for a $14.99 monthly
monitoring service that must be actively canceled.)
A TEST SPIN
To get an idea of how different - or alike - these different
scores are, Reuters asked a consumer (who asked not to be
identified) to share two sets of paid and free scores a month
In the first round, the consumer's FICO score (based on
Equifax data) was 780 on a scale of 300-850. That compared to
774 on Credit Karma, which used TransUnion's TransRisk scoring
system, 830 on Credit Sesame, which uses Experian's National
Equivalency Score and 760 on Quizzle, which used calculations
from CE Analytics Inc. All of those are top scores that would
put the consumer in the lowest-risk, lowest-interest rate
A month later, the consumer's FICO score rose to 789, while
the Credit Sesame and Quizzle scores remained the same as they
were the prior month and CreditKarma's declined by two points.
At the same time, from a loan application, the consumer was
able to get three FICO-generated scores provided to the lender:
789 using Equifax data, 812 using Experian data and 796 using
That experiment revealed that even free approximate scores
can be useful to the consumer who is loan shopping. Even though
the scores will differ from each other, they are usually in a
similar range, says Kenneth Lin, chief executive officer of
The key is to keep an eye on your credit history since that
is what the scores are built from, he says. "The big differences
are going to come when data is wrong."