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Topics addressed on February 19, 2009:
Experian and myFICO.com
Many of you have sent emails expressing concern that Experian discontinued its relationship with myFICO.com. I would like to provide you with some additional information regarding that decision.
Experian believes that consumers should regularly review their credit report and understand their creditworthiness including their credit score. In fact, Experian is the largest provider of credit reports and scores directly to consumers. We think transparency is important, and the more consumers understand about the lending process, the better informed they are when making credit decisions.
Experian’s recent negotiations to renew the master contract with Fair Isaac, which governs the sale of FICO scores by Experian to its clients, included discussions about Experian’s continued participation in myFICO. In the current master agreement between the companies, Fair Isaac (FICO) prohibits Experian from providing FICO scores directly to consumers, and it is a point in the contract that we would have liked to change.
Experian made every good faith effort to negotiate business terms that would be fair to both companies. However, Fair Isaac insisted on unreasonable terms and demands which they knew Experian could not accept, and damaged further the partnership between Experian and FICO. They then very quickly implied to the public that it was entirely an Experian decision. By not negotiating in good faith and knowingly insisting on unreasonable demands, Fair Isaac is ultimately responsible for Experian not providing its data to myFICO.com.
Most importantly, I want you to be aware that this change by no means eliminates your ability to assess your creditworthiness, including access to credit scores. There is no one credit score that all financial institutions use to make decisions, and there is also no one credit score that consumers must use to help them understand and manage their credit.
There are many reputable companies that provide credit scores that you can use to evaluate your own creditworthiness before making financial decisions. All of these credit scores provide an analysis of your general credit risk and, most importantly, education tools to help you understand what in your credit report influences that risk position. For example, when you request your free credit report each year from http://www.AnnualCreditReport.com, you have the option of purchasing a credit score from each of the three credit reporting companies.
A misperception perpetuated by Fair Isaac is that the credit score consumers purchase on myFICO.com is the same score a lender sees and uses exclusively to make decisions. There are hundreds of scorecards used by lenders including various versions of FICO models, scores developed by the credit bureaus and other companies, and custom scores often built by the lenders. The majority of the time, lenders use many scoring models to make lending decisions.
As the recent issues with the banks and mortgage lenders have demonstrated, over-relying on a credit score to make lending decisions is often misleading and dangerous, both for the consumer and for the banks. As a result of aggressive lending practices, including over reliance on a simple credit score, banks are incurring billions of dollars of losses and have now changed their credit practices to use many more data points in making credit decisions. We encourage consumers to review the details on your credit report and make sure it is complete and accurate. A credit score, from any company, is simply a statistical summary of the information on your report. It’s a tool, not an answer.
Thank you for giving me the opportunity to provide you with this additional information. We apologize for any inconvenience this has caused you.
As always, I encourage you to know what is in your credit history and understand how that history would be viewed in terms of credit risk, no matter which scoring model might be applied.
Thanks for reading.
- The "Ask Experian" team