June 30th, 2015 8:51 AM by Jackie A. Graves, President
The widely used FICO credit score has become easier to check for
millions of U.S. adults.
But consumers can’t assume that the FICO score a lender shows
them is the exact same FICO score that lender—or another one—will use in
evaluating an application for a credit card, car loan or mortgage.
Most consumers have dozens of FICO scores, and the exact score a
lender pulls up depends in part on the credit-reporting firm that supplies it
and the type of FICO score the lender chooses to use.
“It’s almost guaranteed that it won’t be the same score,”
says John Ulzheimer, president of consumer education at
CreditSesame.com, a credit-management site. That could mean consumers won’t get
as good a deal as they expect.
More lenders have been offering many customers their FICO credit
score without charge over the past year and a half. Lenders such as Ally
Financial, Citigroup and Discover
Financial Services began giving out this score under a program launched
Isaac Corp., the creator of FICO scores, in late 2013.
The score can be seen now by 65 million consumers, a big jump
from 32 million late last year and around eight million when the program first
launched, according to Fair Isaac, which also is known as FICO.
FICO scores, which range from 300 to 850, have a significant
impact on consumers’ ability to get loans and other credit, and on the interest
rate they receive. They are used in 90% of consumer-lending decisions,
according to CEB TowerGroup, a financial-services research firm.
Knowing their FICO scores can give consumers an indication of
whether they are likely to get approved for a new loan. Those with a low score
can delay applying and work on improving it. Also, a sudden dive in the score
could be a warning that someone has fraudulently opened accounts in his or her
More lenders plan to start showing customers their score or
expand their offerings. Bank of
America will start providing the score to its credit-card users
later this year. Private-student-loan lender SLM, also known as Sallie Mae,
soon will announce that it will expand its score offering to all its
private-student-loan borrowers and cosigners.
Ally Financial will make the score available to all its car-loan
customers online next month, following a pilot program that made the score
available to fewer than 1,000 customers.
The moves mark a turnaround for a score that until a few years
ago was a mystery to most borrowers. Before this program, consumers had a
difficult time looking up their FICO score for free. A FICO
website has sold consumers their credit scores for years—at a
price that currently ranges from $14.95 to $29.95 a month and includes other
products, such as credit reports. (There also are options for a one-time
In most cases, customers of participating lenders can view their
score when they log on to their credit-card or loan account online.
There are many reasons that the score consumers are shown
through this program isn’t necessarily the same score that lenders will obtain
on them when they apply for a loan.
Many lenders get a score from only one of the three big
credit-reporting firms— Equifax,
Experian and TransUnion—which is the score they show to customers through this
program. (Mortgage lenders are an exception because most pull FICO scores from
all three firms.) For example, Sallie Mae and Barclaycard, the credit-card
issuer and unit of Barclays, check the score from TransUnion, while J.P.
Morgan Chase, which shows some of its Slate credit-card holders their
score, gets it from Experian.
If one credit-reporting firm is missing an account that another
firm has on the person’s credit report, or one of the credit reports has an
error on it, that can affect the credit score the firm provides the lender.
Secondly, FICO has released many updates to the score models
over the years, and some lenders still use earlier versions. While many lenders
use FICO 8, a score the firm launched in 2008, in evaluating applications for
credit cards and some other consumer debt, most mortgage lenders use an older
There also are different types of a single FICO score. The
“base” score predicts the risk of a borrower falling behind on payments on all
types of loans.
Most car-loan lenders use a FICO “auto score” that more heavily
weights prior experience with car loans. Borrowers who previously had a car
loan and made their payments on time could end up with a higher auto score than
base score, says Jim Wehmann, executive vice president of scores at
FICO. The same setup exists for credit-card lenders, some of whom use a “bank
Mr. Wehmann says FICO requires the lenders showing scores to
disclose the credit-reporting firm they receive these numbers from, the score
version and the specific type if it isn’t a base score.
Lenders, for their part, point out that the score they show
consumers is the one they actually use when making decisions on existing
Nearly 200 million consumers in the U.S. have FICO scores,
according to the company. Most of them each have at least 60 FICO scores, Mr.
FICO doesn’t dispute that but says the number of scores being
used by lenders in most consumer decisions is far smaller. Each of the three
credit-reporting firms has six or seven FICO scores per scorable consumer that
collectively account for 95% of the FICO scores that were pulled in the past
year by lenders, Mr. Wehmann says.
In most cases, all of a consumer’s FICO scores should be in the
same ballpark—generally not varying by more than 25 points—and the score
differences shouldn’t change a lender’s decision to approve a borrower, Mr.
But varying scores can affect the interest rates a consumer is
charged. As of Thursday, borrowers with a 720 or higher FICO score got an
average 3.183% annual percentage rate on a 36-month car loan for a new vehicle,
compared with a 4.546% APR on average for borrowers with a score between 690
and 719, according to Informa Research Services, a market-research firm.
By Annamaria Andriotis – To view the
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