January 3, 2017 By

Bureaus fined for credit score confusion

51w4H0Y7W7L._SX333_BO1,204,203,200_The Consumer Financial Protection Bureau today ordered Equifax and TransUnion to pay more than $23 million in restitution and fines for deceiving consumers about the usefulness and actual cost of credit scores they sold to consumers. Regulators said the bureaus also lured customers into expensive subscriptions when people thought they were getting free scores.

The CFPB said the bureaus were selling scores without making it clear that they weren’t the FICO scores lenders typically use in their decisions. TransUnion was selling VantageScores and Equifax sold a proprietary score. (Important to note here that VantageScores are now offered for free by many sites, including my employer NerdWallet.)

Credit scoring can be complex, and people are easily confused about the different types of scores and how they’re used by lenders. For example, many people think they have one credit score, when in fact we have many, and those scores change all the time.

People often don’t understand that the scores they’re seeing aren’t necessarily the ones used by lenders. Most lenders use some version of the FICO credit scoring formula, but FICOs come in many different versions and iterations. There are different generations of FICO scores and formulas tweaked for different industries, such as credit cards or auto loans. Furthermore, the FICOs you get from one major credit bureau will differ from the FICOs you can get from the two other bureaus.
Before VantageScore, the bureaus often sold proprietary scores that were used by few, if any, lenders. That led consumer advocates to label these proprietary scores as “FAKO” scores. VantageScores definitely aren’t FAKOs, since they’re used by 20 of the 25 largest financial institutions. But they may be used behind the scenes–for marketing or testing, rather than for deciding whether you get a loan or the interest rate you’ll get.
A VantageScores can give you a general idea of how lenders might view you as a credit risk. If you’re in the market for a major loan such as a mortgage or auto loan, however, you should consider buying the appropriate FICOs from MyFICO.com to get the clearest idea of where you stand.

Filed Under: Liz's Blog Tagged With: , , , , , ,
October 8, 2015 By

Thursday’s need-to-know money news

images (1)Today’s top story: TransUnion is about to change the game for those without credit scores. Also in the news: Why managing your money seems terrifying, 12 things you should never do with your money, and money moves to make before the end of the year.

60 Million People Who Don’t Have a Credit Score Could Be in Luck
TransUnion is about to change the credit score game.

8 Reasons Managing Money Seems Terrifying
How to overcome your fears.

12 things you should never do with your money
Never ever.

Make these 10 money moves before 2015 is over
Time to get your year-end finances in order.

Filed Under: Liz's Blog Tagged With: , , , ,
April 1, 2015 By

Wednesday’s need-to-know money news

22856641_SAToday’s top story: What you need to know about IRA conversions and college financial aid. Also in the news: Avoiding costly tax mistakes, tips for buying a home when you’re in debt, and five things you didn’t know about a 529 plan.

Roth IRA Conversions And College Aid: Timing Is Everything
How a conversion could affect your child’s financial aid eligibility.

Ten Tax Tips to Avoid Costly Mistakes
Pay close attention to detail.

2 Strategies for Buying a Home When You’re in Debt
The important questions you need to ask yourself.

5 Secrets You Didn’t Know About A 529 Plan
The sooner you begin saving, the better.

How TransUnion’s IPO Could Affect Your Credit Score
What going public could mean for you.

Filed Under: Liz's Blog Tagged With: , , , , , , ,
March 9, 2015 By

Big changes afoot for credit bureaus and your scores

check-credit-report-easilyCredit bureaus will have to hold off on reporting delinquent medical bills and supply actual human beings to review disputes under an agreement announced today with New York’s attorney general.

The Wall Street Journal reported that the agreement, to be announced later today, will change how credit bureaus operate nationally. Bureaus will have to wait 180 days before reporting any medical debt on people’s credit reports. When an insurance company pays a medical bill, all references to it will have to be deleted from the individual’s reports.

This is a big deal, since the Consumer Financial Protection Bureau estimates about 43 million Americans medical collection accounts on their credit reports. One such collection can devastate an otherwise pristine credit report and cause credit scores to plunge.

Having human beings review disputes is another significant change. Currently, humans stick a code on disputes before they’re sent to lenders, but the process is highly automated. Errors that have been removed from a report can crop up again (and again and again) when the lenders upload their data files to the bureaus. Getting problems fixed can be a frustrating process when you can’t get a human being to intervene.

The changes won’t happen overnight. The bureaus have three and a half years to roll them out.

Filed Under: Liz's Blog Tagged With: , , , , , , , ,
May 9, 2013 By

Experian to offer FICOs to consumers again

YCS4 coverExperian stopped offering FICO scores to consumers a few years ago, even though it continued to sell the scores to lenders. This refusal made it tough for consumers to know what rates they should expect from mortgage lenders, which typically take the middle of your three FICO scores (one from each bureau). You could still get your TransUnion and Equifax FICOs from MyFico.com, but not your Experian FICO.

That’s apparently about to change. Buried in a press release today was an announcement that Experian will once again “make FICO Scores available to consumers through myFICO.com and through third parties.”

“This is great news for consumers,” said credit scoring expert John Ulzheimer, the president of consumer education for SmartCredit.com who tipped me off to this important development.
After withdrawing from its partnership with MyFico.com, Experian continued to sell credit scores to consumers–but they weren’t the same scores lenders typically used. One score Experian sells, the PLUS score, isn’t used by lenders, while the VantageScore is used by about 10% of lenders. FICOs, on the other hand, are the leading score, so being able to get them again from Experian is a real boon.

Filed Under: Credit Scoring, Liz's Blog Tagged With: , , , , , , ,