Credit scores and the confusion they cause have once again stepped into the national spotlight with the release last week of the Consumer Financial Protection Bureau's (CFPB) Analysis of Differences between Consumer and Creditor-Purchased Credit Scores, as part of the Dodd-Frank Act requirement that the CFPB compare credit scores sold to creditors and those sold to consumers to determine whether differences between those scores put consumers at a disadvantage.
The study reported that as much as 73%-80% of the time, an "educational" score obtained from one of the many consumer websites is likely to place the consumer within the same "credit-quality category" as a creditor-purchased score - many of which are not available to consumers. While many reacted to the report with surprise that up to one in four scores for consumers are significantly different than the ones lenders see, some of us who have advocated for years for more score disclosure, were surprised that the scoring models were that accurate. Such results indicate a strong correlation (.90 out of a possible one) between the educational and creditor-purchased scores.
While not necessarily the intent of the CFPB study, these rather unexpected results reveal that there just may be too much emphasis being placed on credit scores nowadays, while the underlying credit report information and score factors that accompany most credit scores - both educational and lender-purchases - can be just as important, or more so, than matching the three-digit number a lender may be using.
With a goal of getting past credit scores by refocusing on credit report accuracy and using score factors for improvement, what follows is a list of five reasons why your score may not matter all that much anyway:
Consumer access to credit scores over the past decade has helped consumers become more savvy and empowered than ever. Now it may be time to reassess the importance of credit scores as the main consumer empowerment tool, and instead refocus on the credit report, score factors and managing credit responsibly.
Image: andymangold, via Flickr