December 5, 2023

Bucks Blog: Why Credit Scores Aren’t Always What They Seem

When consumers buy access to their credit score, there’s a good chance they’re not seeing the same score a lender sees, the Consumer Financial Protection Bureau reports.

Specifically, one in five consumers who pays for a score from one of the major credit bureaus will probably receive a meaningfully different score than the one a lender will use to make a decision about lending the consumer money, the agency says.

That’s because the scores sold to consumers are not necessarily generated by the scoring models used to create scores sold to lenders — usually, some version of the FICO score, created by the company of the same name. Rather, consumers may be sold “educational” scores, created by using different models.

Even if consumers buy a FICO score — like those at the Web site, which offers scores generated by credit data from the TransUnion and Equifax credit agencies — and go to a lender that uses FICO scores, the purchased score still may not be the one that particular creditor uses. That’s because there are many different versions of the FICO score, depending on various factors, like the type of credit a consumer is applying for, the version of FICO’s model the lender is using and the credit bureau the lender uses.

For its analysis, the agency looked at credit scores generated from 200,000 randomly selected credit files at each of the three major credit bureaus: TransUnion, Equifax and Experian.

For a majority of consumers, the agency found, the scores produced by different scoring models provided similar information about the relative creditworthiness of the consumers. But for a substantial minority, different scoring models gave meaningfully different results.

A meaningful difference, the agency said, means the consumer would probably qualify for better or worse credit offers than those they would expect to get based on the score they bought. As a result, the bureau concluded, consumers shouldn’t rely exclusively on those scores to gauge how a lender would evaluate their creditworthiness.

The report stopped short of saying that credit scores bought by consumers were worthless. But it’s hard to see why you should pay for a score if you can’t be certain that it’s the one a lender would use. After all, isn’t that why you want to see it in the first place?

The agency recommended that firms selling scores make consumers aware that the scores they buy may vary substantially from scores used by creditors. And it’s possible the agency will recommend changes in the way scores are marketed to consumers, when it assumes regulatory authority over the credit bureaus this month.

For now, the agency advises consumers to be aware that multiple versions of credit scores exist. And they should periodically review their credit reports, which provide the raw data used to produce credit scores, and dispute any errors.

John Ulzheimer, a credit expert, said the agency’s report suggested that scores being sold to consumers were a “fairly good approximation” of their FICO score, but were “clearly not good enough.”

Chi Chi Wu, a lawyer with the National Consumer Law Center, said in a statement that the “obvious policy solution” was for Congress to grant consumers the right to a free annual copy of the score most widely used by lenders. Right now, consumers can get a free copy annually of their credit report — on which credit scores are based — but not of their credit score.

Do you think a free annual peek at your basic FICO credit score would be beneficial?

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Bucks Blog: Why You Have 49 Different FICO Scores

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As a consumer, you hear a lot about the importance of maintaining a good credit score. Most often, that means your FICO score — the score developed by the company of the same name to help lenders evaluate the creditworthiness of a potential borrower. But it probably makes more sense to talk about your credit scores, plural.

That’s because other outfits produce credit scores, too — and FICO itself has many different varieties of scores, depending on the type of loan you’re seeking. In fact, John Ulzheimer, a credit expert, has worked with to create a snazzy infographic (which you can click on above, and then zoom in on) showing a total of 49 different versions of your credit score under the FICO umbrella.

That’s right, more than four dozen. Why so many?

FICO created the basic formula — the general purpose FICO, if you will — that is used to crunch consumer credit data for all loan types. The credit data is collected by the three major credit bureaus (Equifax, Experian and TransUnion) and analyzed by FICO to create a single, three-digit score. So there are three versions of the basic score, just for starters.

But FICO also has several other versions, customized for the specific type of loan in question — say, an automobile loan, a mortgage or a credit card. Each is also offered by the credit bureaus, under their own brands. And each version may have multiple releases, as FICO’s formula for crunching the data is updated. So you can see how the versions pretty quickly add up to nearly fifty.

All this can be confusing for consumers, Mr. Ulzheimer says, who may wonder. “Why is the score I get here not the same as what they get there?”

That issue is currently under review by the Consumer Financial Protection Bureau, because consumers may pay for a credit score from various consumer Web sites but get a generic FICO or other score, which may differ from the actual score a lender is using to evaluate their creditworthiness.

For now, the main point to keep in mind, Mr. Ulzheimer says, is that the same general principal applies to keeping your scores attractive to lenders: Pay your bills on time, maintain low credit-card balances and apply for credit only when you really need it, “not to save 10 percent at the mall,” he said.

Have you paid for your credit score recently? Did you find it useful?

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Bucks Blog: Why It’s Not Easy to Freeze Your Child’s Credit File

In her job as an analyst specializing in the retail banking world, Julie McNelley talks to a lot of bank executives. Recently, she says, she has heard concerns about child identity theft involving the use of a minor’s Social Security number to commit financial fraud.

How serious a risk is child identity fraud? The Federal Trade Commission recently cited a report from ID Analytics, an identity-theft prevention firm, estimating that 140,000 minors may be at risk each year. (For perspective, there are 73 million Americans under age 18, according to the latest Census.) Sometimes the perpetrator isn’t a stranger but a strapped family member in need of fresh credit.

A report this spring from CyLab, a research center at Carnegie Mellon University, said an analysis of 43,000 children registered with a commercial identity protection service found that 10 percent of them had someone else using their Social Security number. But the statistical significance of the finding in the general population is undetermined, the report said.

Still, child identity theft can be particularly insidious because it may go undiscovered for years, until the child grows up and applies for credit. So Ms. McNelley, who is also a parent, decided to take the initiative and seek a security freeze in her young son’s name at the three major credit-reporting bureaus. (My colleague Ron Lieber wrote about credit freezes in a recent column.) She doesn’t have reason to believe his information is being misused, she said. “I’m choosing to err on the side of caution.”

But Ms. McNelley, who blogged about her effort, found that she had trouble accomplishing her mission. In fact, according to the three major credit bureaus, it’s not really an option, unless a child is already a victim.

A security freeze is a tool that can be used to shut access to an existing credit file, said Rod Griffin, director of public education for Experian, one of the major bureaus. Most children don’t have credit files — or at least, they shouldn’t. (The main exception is if a parent has added a teenager, say, as a cardholder on a credit card account; that may establish a file.) Generally, a file is created the first time an application is received for credit. So if a child’s Social Security number hasn’t been used on a credit application, there should be no file. And “if there isn’t one,” Mr. Griffin said, “there’s nothing to freeze.”

Spokesmen for TransUnion and Equifax gave similar responses to a question about whether parents could freeze access to a child’s Social Security number. A security freeze, the TransUnion spokesman noted in an e-mail, “applies to a credit file, not a SSN.”

So rather than starting out by asking for a freeze, parents may want to step back and consider if they have reason to suspect that their child’s information may be at risk. Gabby Beltran, a spokeswoman for Identity Theft Resource Center, a nonprofit group, said it recommends that parents initiate an inquiry with the credit bureaus only if they suspect a problem. (Repeated inquiries, she says, may inadvertently create a semblance of a credit record, which is what you are trying to avoid.) Warning signals may include getting preapproved credit offers in your child’s name in the mail (although that can sometimes happen if you open a savings account in your child’s name, so you shouldn’t panic if that happens), or calls from collection agencies about accounts in your child’s name that you don’t know about.

If you are worried, you can find information from Experian and Transunion on their Web sites about how to check if there is a credit file in your child’s name. (An Equifax spokesman said parents could contact the bureau regarding a minor child’s credit file at the following address:Equifax Inc., In care of minor child, P.O. Box 105139, Atlanta, Ga. 30348. The letter must state the child’s Social Security number and include a copy of the child’s birth certificate as well as the parent’s driver’s license or other identification.)

Generally, when contacting the bureaus, you must send documentation via Postal Service mail to prove you are the parent or guardian of the child in question. (The Identity Theft Resource Center offers sample letters to send.)

If there’s no file, there’s probably no problem. If there is a file, the bureau will send it to you. If you see evidence of fraud, you can request a fraud alert to flag potential creditors of the problem and take steps to correct the record. Mr. Griffin says Experian will agree to a freeze or fraud alert if there is a report and will work with the parent to remove fraudulent accounts.

There are commercial services that offer to monitor your, or your child’s, Social Security number for potential misuse. A unit of Experian, for instance, offers the service for about $20 a month.

Consultants say it makes sense to take care with your child’s Social Security number. You must provide it if establishing certain financial accounts, but it’s not usually mandatory in other cases. If it’s requested at your pediatrician’s office, or to register for school or for child athletic activities, ask why it’s being sought, how it’s used and how the information will be protected if you provide it.

Ms. McNelley says she never provides her child’s Social Security number at a doctor’s office, and she has never been questioned about leaving that space blank on a form. She says she is waiting for a response to her written requests for a credit freeze for her son and will update her blog when she hears.

Have you ever suspected misuse of your child’s Social Security number? What steps did you take?

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Bucks: Want to Pay Less for Car Insurance? Have Good Credit

Everyone knows that having a good credit score qualifies you for lower interest rates on loans and better terms on credit cards. But it can also affect the rates you pay for car insurance — sometimes quite significantly, when the savings are measured over time.

The most important factors in setting rates generally are your age, where you live and driving record, says Des Toups, senior managing editor of, a rate-quoting Web site. But most insurers also check your credit when quoting a rate, because there’s a correlation between your score and the likelihood you will file an insurance claim. The higher the score, the less likely you are to file one.

While the practice of checking credit scores for auto insurance quotes is widespread, it’s still somewhat controversial. One company, Cure Insurance, markets itself as one that specifically does not check credit scores. “Think about it,” the round blue “spokes head” that functions as the company’s logo, says on its Web site. “What does credit history have to do with your driving skills?” A handful of states, including California and Massachusetts, forbid the practice of checking credit scores for auto insurance quotes. But efforts to ban it nationally through federal legislation have failed.

An analysis from finds that drivers with credit scores over 750 – typically considered very good credit — pay considerably less than a driver in the same age bracket with merely average scores.

The study compared the lowest rates offered for nearly 43,000 single-driver policies insuring one car with liability, comprehensive and collision coverage, when the driver reports no violations or accidents. The credit score used was calculated using data from TransUnion, one of the three major credit bureaus; it isn’t a true FICO score, which is the number a lender typically uses. Rather, it’s a version of the so-called insurance score that insurers check when you apply for coverage. The insurance version uses the same information as a traditional credit score, but gives more weight to factors deemed to reflect risk, like bankruptcy filings and maxed-out credit cards, Mr. Toups says.

The analysis found that young adults ages 25 to 34 with clean driving records, for instance, pay an average of $1,938 a year for full auto coverage. But those same drivers with a credit score over 750 pay an average of $1,155 — a 40 percent savings.

Drivers in that same age group with credit scores of 650 to 749 pay an average of $1,658, a savings of $280 compared with the overall average; those with lower scores, of 500 to 649, pay an average of $2,023, or $85 more. (Drivers with no credit file are penalized the most; they pay an average of $2,182, or $244 more than the overall average.)

The benefit continues through subsequent age brackets as well. Premiums tend to drop as drivers age, but high credit scores still mean you’ll pay less. If you kept a good credit score until retirement, you’d save nearly $23,000 over the average premium paid by people with similar driving records, Mr. Toups says.

Do you think it’s fair that your credit history affects your car insurance rates?

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Bucks: A Free FICO Score With Your Credit Card

MT Bank is now offering its online-banking customers access to their credit score for a monthly fee.

MT account holders can opt to pay $2.99 a month, which allows them to get their score from Equifax, one of the three major credit bureaus.

The score is a true FICO score — that is, the Equifax score a lender would see if you applied for credit, said Mike Shryne, manager of alternative banking for MT. The three-digit score, ranging from 300 to 850, combines information like your payment history, credit card balances and other factors into a snapshot of your creditworthiness.

Mr. Shryne said the bank’s research showed its customers had a heightened awareness of how important one’s credit score was to the ability to borrow, and also to monitor financial security in the age of identity theft. “Your FICO score is one of the early warning bells, of something is going wrong,” he said, such as if someone were to use your personal information to take out a loan or apply for a credit card.

MT updates the scores monthly, so the fee allows bank customers to track changes over time. (Customers can access the score as often as they wish, but it doesn’t change on a daily basis.) “If it changes materially from one month to the next, and you’re not sure why, it’s a red light going off,” Mr. Shryne said.

But if the score is so important to customers, why not offer it free? Mr. Shryne said that contrary to popular belief, banks don’t have free access to their customers’ credit scores. So part of the fee the bank charges customers is used to pay Equifax for the scores, he said. “It’s a straight fee for a straight service,” he said. “We believe $2.99 is a fair price to ask.”

At one time, the old Washington Mutual offered its credit card customers free access to a credit score, but that service disappeared after many of WaMu’s assets were bought by JPMorgan Chase. A Chase spokeswoman said the bank currently had no plans to offer credit scores.

One advantage to buying the score through MT, Mr. Shryne said, is that customers don’t have to worry about misleading offers on some credit score Web sites, which entice consumers with offers of free scores, but then charge them, say, $15 a month unless they then cancel the service. “Many of these free offers have hidden fees,” he said.

Mr. Shyne said the credit score option was one of a menu of fee-based services the bank was introducing to help set MT apart from its competitors. Just last month, it made available a suite of personal finance and budgeting tools called FinanceWorks, offered at 99 cents a month. MT has about 780 branches throughout the mid-Atlantic states and the District of Columbia.

Would you pay $2.99 a month for “anytime access” to just one of your three FICO credit scores?

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Bucks: A Tool to Weigh Debt Payment Options

A new tool from can pull your actual credit card balances from the credit bureau Experian to analyze your debt. It then provides detailed options for getting rid of it, customized to your situation.

The tool, called Debt Coach, also offers what says is previously unavailable information on so-called “concession” or “settlement” rates that credit card companies typically offer, should you decide to enter into a formal agreement to pay off your balances.

Brad Stroh, founder and chief executive of, said the tool gives more information to consumers evaluating various debt payment options. “We did a ton of work on the data aggregation,” Mr. Stroh said in a telephone interview. “We’re the only one with this type of tool.”  The tool debuted on Wednesday at the Finovate conference in San Francisco, a semiannual gathering of providers of online financial tools.

Here’s how it works.

Users enter information on their financial situation by answering questions about whether they own a home, what they think their credit score is and their ZIP code. They then rank their desired outcome: Is preserving their credit score the most important to them? Do they want low monthly payments, or do they want to get rid of the debt as quickly as possible? Are they willing to put up with some stress and uncertainty, or do they want a clear outcome?

Next, users enter their name and date of birth so the tool can download their credit card data from Experian. (They don’t have to enter their Social Security number.) Experian first verifies their identity by asking questions drawn from information in their credit report. The system is similar to the process that Experian and the other major credit bureaus use to verify the identities of consumers seeking online access to their credit report, and may include questions related to previous addresses or lenders. No account numbers are transferred to Debt Coach, Mr. Stroh said.

Although users are accessing information from their credit report, it’s considered a “soft” pull of information, rather than a full credit inquiry initiated as a part of a credit application, and so does not affect the user’s credit score, Mr. Stroh said. The inquiry is free to consumers. Debt Coach pays a fee to Experian for the information, he said. The information transferred doesn’t include the user’s credit score because that information is more expensive to gather and Debt Coach would probably have to charge users a fee to provide it, Mr. Stroh said.

After the information is transferred, the tool lists the user’s credit card balances and the current interest rate being paid, along with the “concession” rate available if the user chooses various options. The user can see, for example, that he’s paying 25 percent on a Best Buy store card, but can reduce that to 9 percent by going to an approved credit counseling program. Similarly, a 14.35 percent rate on a Chase card could go down to 6 percent. (The tool focuses on unsecured debt, not secured debt like a mortgage or car loan, because there generally isn’t a concession rate available for those types of loans.)

The tool then lists, side by side, five options available to users, including maintaining their current payment schedule; setting up a self-payment schedule with, say, a “snowball” strategy, in which minimum payments are met and any extra funds are applied to the highest rate debt; credit counseling; debt settlement; or using cash from a refinancing of their home, if they own one.

The tool outlines the pros and cons of each option and highlights the one that best fits the customer’s stated preferences and goals. Using debt settlement, for example, in which a firm often charges a fee to negotiate a reduction in your debt, can end up being a lower-cost option, but it’s riskier and more stressful. Your credit score will probably take a big hit, and lenders can continue making collection calls throughout the negotiations and may even start legal action. Unless a user’s stated preference leads to debt settlement as the best solution, Debt Coach offers a warning stating that it is a “nontraditional form of debt consolidation, and should only be used by consumers with severe financial hardship.”

Seeking credit counseling may not reduce your debt as much, but collection efforts cease once a plan is agreed upon, so it’s less stressful.

The tool offers referrals to firms it considers reputable. If a consumer seeks a consultation with one of them, collects a referral fee (as it does with other types of referrals elsewhere on the site, like those to mortgage lenders). The company estimates, for instance, that fees from debt settlement firms represent less than 7 percent of its revenue. But, Mr. Stroh said in a follow-up e-mail, “there is no ‘bias’ toward any one tool or solution in Debt Coach.”

If you’re worried about managing your credit card debt, does this sound like a tool you would try? If you use Debt Coach, please let us know about your experience.

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Bucks: Bad Loan Terms? Some Clues Why

Did you apply for a loan but receive a higher interest rate than you think you deserve? You’re now entitled to receive a few clues about how the lender arrived at its decision.

A federal law that went into effect at the beginning of the year requires lenders to make certain disclosures to consumers when they receive less favorable credit terms than those given to borrowers with more pristine credit histories. That may come in the form of a higher interest rate, or a smaller line of credit.

Lenders can comply with the new law, which is essentially an update to the Fair Credit Reporting Act, by sending you one of two notices, said Careen Foster, director of scores product management at FICO, the company that developed the FICO credit score, the measure used most frequently by traditional lenders to determine creditworthiness.

In one of those notices, the lender must disclose which credit report it used to judge you — most lenders use the reports created by the three major credit bureaus, Experian, Equifax and TransUnion. The lender also must provide information on how to get a free copy of the report. Before the new rule, only individuals who were denied credit were entitled to a free copy. You must request the copy within 60 days of receiving the letter — known as a “risk-based pricing notice” — though it won’t include a copy of your credit score.

Alternatively, lenders can choose to send all consumers who are approved for credit another notice — known as the credit score disclosure notice — that will include their credit score. In most cases, the score will be one of your three FICO scores.

The goal of the new rule is to help consumers more broadly understand how their credit reports are used, and encourage them to identify any errors and request to have them fixed, Ms. Foster said. “By getting consumers engaged in the process, we will help everyone make better decisions,” she added.

But starting July 21, anyone who is denied credit or who receives less favorable terms than other borrowers must receive a free credit score (if a credit score was used in the lender’s decision). The new rules sprang from the financial regulation overhaul last year.

“All of the disclosure notices will start to look pretty similar” at that point, Ms. Foster said. “This is good for consumers because they will get the credit score the lender uses, which is going to be the FICO score more often,” she added. It will also include “the factors as to why their score wasn’t higher and what they can do to improve their score or get better terms next time.”

Technically speaking, the July law requires the so-called risk-based pricing notices to include a score, in addition to information about where to get the credit report the lender used in the decision.

Lenders are already required to send a letter to consumers who are denied credit or whose existing terms were changed for the worse. The notice must outline their reasons and provide information on how to get a copy of their credit report. In July, those letters must include scores too, said Manas Mohapatra, an attorney in the division of privacy and identity protection at the Federal Trade Commission.

Some lenders, however, will continue to comply with the law by sending notices – with scores — to all borrowers who receive credit. FICO has a Web site,, which provides more information for consumers about the changes.

Have you received one of these notices in the mail? If so, was it helpful in clarifying why you received the terms you did?

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