Yesterday, I was surprised by an announcement from Experian, who announced that after February 14, 2009, it will no longer offer the FICO score based on its credit database.  I consider this a move to force lenders and consumers to abandon the FICO credit score model developed by Fair Isaac and use instead the its own “PLUS” (aka the VantageScore) system.  The FICO score is the score most used by lenders, and it offered for sale on Fair Issac’s website, myfico.com.   Currently, consumers can go to myfico.com and purchase 3 FICO scores, based on data from each of the major credit bureaus.

Why would Experian try and influence lenders to use its model?  The name of the game is revenue, and licensing of a scoring model to lenders means big bucks to the credit score model developer.

The next question is why should you, the consumer, care what scoring model is used when you order your credit score.   The difference can be huge.  If a mortgage lender says you need a 700 credit score to qualify for a loan, they generally mean a FICO score.   As we stated before, most lenders are not using the VantageScore scoring model developed by the credit bureaus. If you can only get access to a Experian VantageScore or a “PLUS” score, you won’t know in advance if you qualify, which can lead to aggravation and unpleasant surprises.    Some in the credit industry (including most of the readers on our discussion boards) call the credit bureaus VantageScore models FAKO scores (’cuz they’re fake),  instead of FICO scores.

You might be asking yourself how it’s possible to get a different score out of the same credit bureau data.  How it works is this: the FICO Scoring system weights some of that data more heavily in favor of consumers than the Vantage Score, some less favorably.  There is even a different points range between the two models.  You can do a comparison here.  Same data, but different scores result.  Depending on the individual, the score differences can be big. You are really comparing apples and oranges.

With the coming change, a consumer will not be able to purchase their FICO score based on Experian data anywhere.   One ray of light, consumers will still be able to see all the information on their Experian credit report, even if the FICO score based on that information will not be available.  The FACT Act in 2003 forced the credit bureaus to give out one free annual credit report to consumers, but scores needed to be purchased.  If you apply for a mortgage, your mortgage lender may be good enough to show you your FICO score.

Will TransUnion and Equifax follow suit?  Since the VantageScore model was a joint effort by all 3, my guess is “yes”.    If this happens, we are reverting partially to 1997, before which a consumer was not allowed to see his or her credit score or credit reports.  (If you can’t see the score the lenders use, you don’t have access to your true score.) The changes to the FCRA in 1997 forced the Big 3 to allow consumers to purchase credit reports and scores.

I guess they just didn’t say which kind of score the bureaus had to sell you.

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