Buzz
The entire credit industry is incredibly complex and often contradicts sound financial habits. It's frustrating, and what makes it even worse is that you don’t just have a single credit score. In fact, you have several, and the latest scandal involving Experian highlights that many people don’t know this.
You’ve likely heard of Experian. It’s one of the three major credit bureaus, alongside TransUnion and Equifax. These companies monitor and assess consumer credit using reports and scores. This week, the Consumer Financial Protection Bureau (CFPB) fined Experian $3 million for causing confusion about the scores they provide. MarketWatch reports:
In its complaint against Experian, the CFPB pointed out that in some cases, there were notable discrepancies between the credit scores the company offered to consumers and the scores lenders actually relied on. 'As a result, Experian’s credit scores in these cases presented an inaccurate view of how lenders evaluated consumer creditworthiness,' the agency stated.
Experian isn’t the only culprit, though. Both TransUnion and Equifax were slapped with similar fines earlier this year. According to the CFPB, these bureaus led customers to believe that their proprietary scores were the same ones used by lenders to make lending decisions.
In reality, you actually have several different credit scores, and they can vary depending on the type of loan you’re applying for (and credit isn’t just for loans—landlords and utility providers also check your credit). There are scores specifically for mortgage lending, for example. However, the FICO score, which is the oldest model, remains the most widely used, with FICO reporting that their model is used in 90% of credit decisions. While your credit scores should generally align, there's no guarantee. Your best approach is likely to focus on your credit report instead, as it gives you a much more comprehensive view of your credit, including details on your open accounts, collections, and outstanding balances.
