Credit scores…do we really understand where they come from and how they are used? A study just released by researchers at the Consumer Financial Protection Bureau found that credit bureaus sometimes provide Americans with credit scores different than those used by lenders in as many as one out of four times. The study was based on a random sample of 200,000 credit files from the three major credit reporting agencies – Experian, TransUnion and Equifax.
The Consumer Financial Protection Bureau will now begin supervising credit-reporting firms…about 30 companies. Another layer of bureaucracy required because these firms cannot be relied upon to self monitor. And what is the benefit to being inconsistent? It’s not too difficult to provide the same information to the consumer that you are providing to the lender.
Now that consumers are well informed about the necessity to monitor their credit scores, it’s only fair they receive the same information. Credit scores are used in determining who does and doesn’t get a loan, what your interest rate will be, etc. Really important factors. To both the borrower and the lender. Let’s get it right…and be consistent.
According to the NY Times, credit scores are getting a facelift.
A company called CoreLogic has introduced a new type of credit report which contains additional consumer data than what the traditional credit bureaus (TransUnion, Experian, Equifax) show.
Have you missed a rental payment that is now in collections or are you behind on HOA dues? Have you been evicted or served child support judgments? Ever taken out a payday loan? All of this is included in the new credit report. There is also the possibility to show that your house is worth less than what you owe.
Since most of this information is already available to the public, it was only a matter of time before someone decided to compile this data to help lenders determine credit worthiness. An estimated 100 million American consumers will have a CoreScore credit report. The actual score will only be available to mortgage and home equity lenders at this time. Next year, CoreLogic will begin to evaluate whether the report should include even more data, like your payment history on utility and cellphone bills.
The positive: the added information can help illustrate positive behaviors otherwise not noted.
The obvious negative: consumers may now have additional dings in their credit history that previously went undetected. Consider yourself warned.