How to find out your credit score
Last week I discussed some of the many factors that go into calculating a credit score and how they are used. As a follow-up to that, you may want to know what your score is and how you measure up to the rest of the world.
Interestingly enough, when credit scoring first came out it was a very secretive system. In fact, lenders were prohibited by agreements with the credit bureaus from disclosing credit scores to borrowers. I recall once being called on the carpet by my employer for telling a client what his score was, and it was explained to me that my company could face considerable civil damages for doing what I had done.
Personally that bothered me a lot (though not the potential civil damages part). I felt consumers should have a right to any information that was being used to decide their financial futures, so in the future I was just more discreet about telling clients their scores.
In fact, the credit bureaus in those days even publicly denied knowing what credit scores were, except of course the billing department always knew what they were billing the mortgage brokers for somehow. We got enormous bills for buying something that officially didn’t exist as far as the spokespeople for the credit bureaus claimed. I always was tempted to ask one of those spokespeople why my company paid their company thousands of dollars a month buying something they claimed they weren’t selling.
Initially all credit scoring was done using models created by one company, Fair Isaac Co. Fair Isaac developed a program called FICO scoring. As such, FICO scores were the first accepted credit scoring models for use in evaluating conventional mortgages insured or purchased by FNMA or FHMC (who eventually are involved one way or the other in over 90 percent of the mortgages originated in this country). So far, that standard has stood in spite of many imitators and competitors that have sprung up.
Of course, if you have a great big secret and everyone knows the subject matter but not the details, everyone wants to know the secret. About six years ago public pressure began to mount to disclose credit scores and the Federal Trade Commission finally ruled that scores should be disclosed. It did not, however, go so far as to say that they needed to be disclosed for free. As a consumer you can pull all three credit reports on line for free at annualcreditreport.com but you will not get your credit scores.
Fair Isaac Co. quickly knew they had a very hot consumer product and the way to deliver it was over the Internet. Many other companies also realized there would be an enormous amount of interest by consumers to know, track and try to improve their credit scores.
Fair Isaac set up myfico.com to sell credit reports and scores direct to consumers. So far, they have sold over 10 million consumers their scores. To get all three reports and all three bureau scores costs about $45. With over $450 million in sales, credit scoring and tracking has turned into something of a national sport as well as a major industry.
And where there are that many zeros competition is sure to follow ” and it has. A host of other companies have taken to cyberspace to sell credit scores. Unfortunately there are only two companies that sell credit scores that will match what your creditors will actually see. The rest are basically selling cotton candy at what has become a very lucrative Internet circus arena.
If you purchase anything other than a genuine FICO score on line, I have a better idea of how to spend your money and that would be to give it to the homeless ” at least it might do someone who needs it some good.
The two places to buy a FICO score are at myfico.com and Transunioncs.com. Myfico will sell you all three of your scores and Transunioncs will sell you just the TransUnion one.
There are many companies online who will sell you a credit score and there are some big names and some honest sounding names. Experian (one of the three major bureaus) will sell you their “Plus score.” True Credit.com has their version as well, as do a host of others.
These scores that are an alternate to FICO are made from proprietary computer models developed by these companies for the sole purpose of having a product to sell. And in reality the programs do provide a measure of what your credit profile looks like. But just like the circus funhouse with the goofy mirrors, these credit scores are just that, one company’s reflection of a number that is extremely complex to determine.
I recently checked out a couple of these sites and compared it my actual FICO scores. The results were anywhere from 2 to 90 points off. As a result, had I been getting ready to apply for a mortgage I might have thought my best score was 90 points higher than what it actually is. Had I called a lender and told them that was my score they would have been pretty impressed and promised me the sun, the moon and the secret map to a lost treasure if I gave them the opportunity to make me a loan.
However when it came time for the lender to actually pull my score it would have been quite a surprise as to “what happened.” The answer is nothing happened. I had bought a ticket to the circus and was looking in a fun house mirror and seeing a distorted version of my credit score while the lender was looking at the real thing. And I would feel pretty burned because I had just spent $50 or more buying something that in reality was pretty worthless in terms of what I was trying to accomplish.
That said, there is one reason to subscribe to these services. If you can find a service that allows you unlimited access to your credit report over the course of the year you might consider signing up. One that I have come to like personally is CreditExpert.com. It is a bit pricey but given your situation may be worth it.
CreditExpert.com is run by Experian, and it is about $79 a year to join. For that you do get their version of your “Plus Score,” which in my opinion is pretty worthless and not a reason to subscribe. What is of some value here is that you can obtain up-to-the-minute copies of your Experian report whenever you want to check your credit history. Note this differs from some sites that offer you “unlimited access” to your report, but you do not necessarily get updates to your report.
In addition CreditExpert.com will monitor your Experian report and notify you via e-mail of any changes to your report, including late payments, new accounts and inquiries. This will allow you to police and deal with any erroneous information that is reported or any suspicious activity such as inquiries from creditors you don’t know, which is one of the early warning signs of identity theft.
Another situation where it’s smart to subscribe to a service like this is if you are trying to clean up your credit from an identity theft incident or even the aftermath of a bankruptcy or divorce. If you are dealing with a number of creditors and trying to get derogatory or incorrect information removed from your report, you would be notified whenever anything did change and you could monitor what has not changed as well. Dealing with someone who made a mistake or didn’t give you what you asked for or were promised immediately is about 10 times as effective as trying to go back months later and do it.
A word of warning in this regard though. If something is reported by a creditor to one bureau do not ever assume it is reported the same way to all three bureaus or if it was, that it was posted in a timely manner by each. All bureaus can have radically different versions of your report and it is important to get all three as close together as possible. However, monitoring one bureau on a continual basis is a pretty good barometer of what the others are doing in terms of updating incorrect information.
In conclusion, spend your money cautiously when it comes to buying your credit report or score over the internet. If you want to buy overpriced cotton candy, go to a circus. When it comes to something as important as your credit score get the real deal or don’t bother.
Chris Neuswanger can be reached at Macro Financial Group in Avon at 970-748-0342. His e-mail is firstname.lastname@example.org. He welcomes mortgage related inquiries from readers.
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