October 30, 2015 9:21 am
“Because other credit scores look similar to FICO Scores, consumers have no way of determining, through the credit score itself, whether or not it’s a FICO Score,” says Jim Wehmann, executive vice president for scores at FICO. “Credit scores are unlike other products; the consequences of not recognizing credit scores from different companies can be much more serious. The new research findings bring to light an important issue: if the majority of consumers are confused about these non-FICO credit scores being provided to them, then millions of Americans are likely to be mistaken about their actual creditworthiness.”
As a separate study recently revealed, FICO Scores are used in more than 90 percent of decisions involving approval of credit applications in the United States, including mortgage loans. According to the FICO report, over 80 percent of consumers believe the non-FICO credit scores they obtain are scores widely used by lenders to make credit decisions.
The mathematical formulas used by each scoring company are unique and create credit scores for the same consumers that are often significantly different from their FICO Scores—sometimes 100 points or more. With such large score differences, not understanding that the credit score obtained isn’t a FICO Score can cause consumers to over- or underestimate how a lender will view them, with serious consequences for financial health and wellbeing.
Today, the holders of more than 100 million consumer credit accounts have access to their FICO Scores for free through the FICO Score Open Access Program.
Published with permission from RISMedia.