Don’t buy useless credit scores

Your FICO score isn't what car dealers, mortgage lenders, and others use

Consumer Reports magazine: July 2013

Illustration: Andrew Baker

Fair Isaac, the company that invented FICO credit scores in 1958, derides its competitors as “FAKO” imitators because their scores aren’t the ones used by lenders in their credit-making decisions.

But the FICO scores that millions of consumers buy each year for $20 a pop are also not the scores that car dealers, auto-finance companies, mortgage lenders, and others use. Moreover, after reviewing material that Fair Isaac provides only to lenders, we think the scores consumers can buy are inferior.

Legislation introduced in March would require the free annual disclosure of scores that lenders actually use, which are now typically kept secret. Consumers Union, the policy and advocacy arm of Consumer Reports, endorses it, as do other consumer groups.

Getting the law passed isn’t expected to be a slam dunk. So for now we recommend taking steps such as requesting the credit score an insurer or lender has used before agreeing to any deal. You can also press for proof of any credit problem that raised your cost of borrowing money or getting insurance, or insist on a refund if scores you’ve purchased prove to be wrong. Or you can just decide not to buy the scores in the first place. Here’s what you need to know.

Unreliable information

Last fall, the Consumer Financial Protection Bureau concluded that “consumers should not rely on credit scores” when considering how lenders view their creditworthiness. That’s because the agency found that in 20 to 32 percent of the cases it studied, the consumer and lender scores rated the same credit file differently enough that the scores were one or more credit-quality categories removed from each other. The discrepancies were much greater for the half of consumers with above-median scores.

A similarity rate of 68 to 80 percent seems like good odds, but “consumers can’t know ahead of time whether the scores they purchase will closely track or vary moderately to significantly from a score sold to creditors,” the CFPB report said.

Unfortunately, the study only scratched the surface of a perplexing problem. It examined just five scoring systems, some of which were already outdated. But “there are hundreds of different scores,” says Steve Wagner, president of Experian, one of the three big credit bureaus. (Equifax and TransUnion are the others.)

VantageScore credit scores, created by the three credit bureaus in 2006, are used by 1,300 lenders, and that brand of score sold to consumers can be the same one that lenders use. But there are three versions of Van­tageScore, which can produce significantly different scores, concedes Sarah Davies, a VantageScore executive. That’s a problem if you buy, say, the new version 3.0 and your lender is still using 1.0 or 2.0.

Experian mostly sells consumers a VantageScore and its own invention, a PLUS score, which has fine print that says it’s “not the score used by lenders.” Auto- and home-insurance companies use still other credit-based scores, usually designed from in-house models.


Fair Isaac alone sells 49 different FICO scores to lenders. But a subsidiary,, sells consumers only two of those, claiming that they’re the “industry standard” used by 90 percent of the top lenders.

Isn’t that misleading? No, says Anthony Sprauve, a Fair Isaac spokesman, because the variations among scores “are not as dramatic as you might think.”

But that’s not what Fair Isaac tells lenders. For example, its sales literature for creditors says the FICO Mortgage Score 1.0 is “more comprehensive and accurate” and “7.5 percent more predictive than the general-purpose FICO score.” The difference is “substantial,” Fair Isaac says.

The various scores carry the FICO brand name, but they’re clearly not the same and produce significantly different results—according to their creators’ own claims. Saying otherwise is like handing someone a Diet Coke and calling it Classic.

How to protect yourself in the credit-score shell game

1. Demand to see the actual proprietary score used before you agree to a loan or an insurance policy. You have the most leverage to get the truth before the deal is sealed.

2. We see no point in buying any consumer credit scores, given that they’re not the same ones used by lenders. But if you do, and a lender or insurer later tells you your real score is lower or higher, do what you’d do with any product that doesn’t deliver: Demand a refund.

3. Always shop for credit at multiple lending sources to find the best rate. Even if lenders won’t divulge their secret scores, getting rate quotes from several will reveal the best deal based on the numerous—and probably different—scoring systems used by prospective creditors.

4. Be sure to get your free annual credit report from each of the big three credit bureaus so you can look for and dispute errors. (Go to We recommend that you stagger your requests and get one report from a different bureau every four months.

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