Your Credit Score Could Be A Fake

Say you want to buy a house or a car and you need a loan to do it. You do what every personal finance site recommends and obtain a free copy of your credit report from annualcreditreport.com.

Then, urged on by the ads from TransUnion, Equifax, or Experian—the “big three” credit reporting firms that compile the reports—you opt for not only the free report but also shell out for what the companies promise is your actual three-digit credit score. A number! Now, you may think, I know what the auto lenders and banks making mortgages really think of me. I have a sense of what rates I qualify for and what type of car or home I can afford.

There’s just one problem: the score you paid for is likely not the same one potential lenders will use to assess you. In fact, it could be way off.

What many consumers don’t realize is that they have no single “credit score”—FICO alone has more than 49 different scoring models. And new research from the Consumer Financial Protection Bureau (CFPB) finds that for one in every five consumers, the score you’re buying from a credit reporting agency varies so greatly from what a lender would see—either better or worse—that the types of credit you’d qualify for would be meaningfully different.  

Worse yet, the CFPB notes, there’s no way to tell whether the score you just purchased is very similar to what lenders are looking at, varies somewhat, or is in another league altogether. You bought a credit score, but the truth is, you don’t know jack.

The consequences for consumers are extreme. Imagine if you qualified for prime credit, but the misleading credit score you just bought suggested that only a subprime loan was within reach. As a result, you might only apply for subprime mortgages when buying a home, and would pay hundreds or thousands of dollars in extra interest and fees. You might even face a higher probability of foreclosure due to the higher costs. Thank you, misleading credit score!

Luckily, there’s a simple solution. As I’ve pointed out before, the major credit reporting companies know quite a bit about our personal finances. Consumers should, in turn, have the right to know more about how this information is used. Specifically, they should get a look at the credit scores actually used by lenders to evaluate them. As we recommended in “Discrediting America,” Demos' overview of the credit reporting industry:

Federal legislation should be passed providing individuals with the right to obtain free annual disclosure of their actual credit scores (as they can currently access their credit reports) including specialty scores used to make decisions about insurance, healthcare and other services.

The CFPB’s powerful new research reinforces the need for this legislation. There’s no reason consumers should be paying for deceptive information when we should be getting accurate data for free.

Comments

After a recent attempted identity theft, I put an alert on my credit reports and obtained all three from annualcreditreport-dot-com , the official site you mention. (The URL seems to trigger your spam filter.)

I was surprised by the degree to which the reports were inconsistent - particularly in relation to accounts that are open but unused, or closed without adverse reporting. I feel fortunate, in that it does not appear that anybody succeeded in obtaining credit before I put the alert on my reports, but if you're trying to find old accounts that may be lingering in he background so that you can close them, you really do need to get all three reports.

Given that one report may have six or more neutral or positive reports from accounts that are presently dormant, or which for some reason are not being reported to the other CRA's (credit reporting agencies), it is no surprise that scores can vary significantly between CRA's. I never pay for my score as I don't think the information is useful - if your credit is bad, you can use common sense to figure out why, so you don't need to know your score to improve it, and if your credit is good it's not really an issue. But I agree with you that if for some reason you do feel a need to know your score, the score you purchase along with your free annual credit report (and let's emphasize - we're talking about the official site of the three major CRA's, mentioned in your post , where you don't have to pay for or subscribe to anything to get your free report) may not be particularly accurate or helpful.

Generally, lenders demand a list of documents from applicant including his residential proof to check his stability, identity proof, copy of utility bills, credit report, income evidence or proof of self employment and so on. The purpose behind asking for all these documents is to check applicant’s overall financial status and stability. Borrower’s credit record also pays major role in his chances of getting an approval and interest rates for bad credit installment loans and other types of personal loans.

Naturally, credit checks still remain one of the most important formalities necessary to obtain a loan. The entire procedure is currently much faster than it used to be in the past – traditional banks used to take weeks to give their decision regarding approval. Luckily, with some companies now incorporating social search and customization in their lender search algorithm, it will probably be even easier to get a loan in the future.

www.unitedfinances.com

The federally-run mortgage buyer, Fannie Mae, said that it had profits of $5.1 billion in the year's second quarter. That also marked its second net increase since the government took control after the bubble burst on the market five years back. This gives sure proof that there is upward motion in the housing industry. A personal finance can help you pay for your mortgage this month.

The federally-run mortgage buyer, Fannie Mae, said that it had profits of $5.1 billion in the year's second quarter. That also marked its second net increase since the government took control after the bubble burst on the market five years back. This gives sure proof that there is upward motion in the housing industry. A personal finance can help you pay for your mortgage this month.See more at:

https://personalmoneynetwork.com/

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