One out of five consumers likely get a “meaningfully different” credit score than would a creditor or lender, according to a study by the Consumer Financial Protection Bureau (CFPB)
When consumers purchase their score from a credit bureau, the score may not be the same as the one a lender would consult in making a decision.
The CFPB’s study looked at credit scores from 200,000 credit files from each of the primary credit bureaus: TransUnion, Equifax, and Experian.
It follows a study the CFPB released last year that delved into the potential problems for consumers when the scores they purchase and the scores creditors use are meaningfully different.
Moreover, consumers are unlikely to know about score discrepancies since there is no way for Americans to know about the score a creditor uses in making a lending decision.
The finding exposes consumer vulnerability in not being able to exclusively rely on the credit score they receive to understand how lenders will view their creditworthiness.
“This study highlights the complexities consumers face in the credit scoring market,” said CFPB Director Richard Cordray. “When consumers buy a credit score, they should be aware that a lender may be using a very different score in making a credit decision.”
The Bureau recommends that consumers consider the following in evaluating the credit score they receive:
Shop around for credit. Consumers should not rule out seeking lower-priced credit because of assumptions they make about their credit score. While some consumers are reluctant to shop for credit out of fear that they will harm their credit score, that negative impact may be overblown. Inquiries generally do not result in a large reduction in a consumer credit score.
Check the credit report for accuracy and dispute errors. Credit scores are calculated based on information in a consumer’s credit file. Inaccurate information may be the difference between a consumer being approved or denied a loan. Before shopping for major credit items, the CFPB recommends that consumers review their credit files for inaccuracies. Each of the national credit bureaus is required by law to provide credit reports for free to consumers who request them once every 12 months.
See http://annualcreditreport.com for obtaining your free credit reports.
The bureau will begin supervising consumer reporting agencies as of September 30, 2012.
The CFPB’s supervisory authority will cover an estimated 30 companies that account for about 94 percent of the market’s annual receipts.
The CFPB’s examiners will be looking to verify that consumer reporting companies are complying with federal consumer financial law, including that the companies are using and providing accurate information, handling consumer disputes, making disclosures available, and preventing fraud and identity theft.