By John Ewoldt Star Tribune (Minneapolis)
Linzi Hansen of Elk River, Minn., requested her credit report after the Target breach, but the 24-year-old found the report frustrating and incomplete.
No one had told her how to read it, and no credit score was included. “I was taught how to balance a checkbook in school,” she said, “but why didn’t they tell me how to read a credit report or interpret a credit score?”
What Hansen and other consumers who get a credit report are discovering is that it doesn’t include a credit score, the all-important piece of financial information that is used by banks, mortgage companies and landlords to assess the credit risk of applicants. While it’s a powerful enough number to cause consumers to be turned down for a loan, they have had to pay for the privilege of seeing it.
A credit score typically ranges from 280 to 990 depending on the provider. FICO, for example, ranges from 280 to 850, while VantageScore Solutions, a joint venture of Experian, TransUnion and Equifax, ranges from 500 to 990. Recently, the Consumer Financial Protection Bureau urged credit card companies to start offering free credit scores to their customers.
Only a few are doing so, including Discover, Barclaycard of Barclays, and First Bankcard of First National Bank of Omaha. Discover cardholders, for example, now receive an updated FICO credit score on each monthly statement.
“The response from Discover card members has been overwhelmingly positive,” said Julie Loeger, senior vice president of brand and acquisition at Discover.
Darryl Dahlheimer of LSS Financial Counseling in Minneapolis thinks the expansion of free credit score availability is good, but he’s leery of companies that may offer them with a catch. “Don’t do it if you have to pay an annual fee or a higher interest rate just to get the free credit score,” he said.
Getting a free FICO score from a credit card is a new occurrence, but similar scores from competitors such as Vantage have been offered free for much longer, said John Ulzheimer, president of consumer education at CreditSesame.com.
Ulzheimer expects the number of credit card companies or other financial institutions, such as mortgage companies, offering free FICO credit scores to expand. Even though companies offering the free FICO scores are paying parent company Fair Isaac for the service, they may see other benefits if customers request cheaper online statements or a reduction in inactive or closed accounts.
FICO senior consumer credit specialist Anthony Sprauve said that FICO is working with every major credit card company, banks, mortgage companies and auto lenders to get them to offer free FICO scores as part of their service.
Currently, about 30 million consumers are getting free FICO score access, although anyone can pay $20 to see their scores at MyFico.com. Free scores that are available at sites such as Credit.com, CreditKarma.com, CreditSesame.com and Quizzle.com are not from FICO and probably use a slightly different scoring system.
Ulzheimer warns consumers that sites such as FreeCreditScore.com, FreeCreditReport.com or FreeScore.com find a way to charge for their service, sometimes up to $30 per month.
The debate about which scoring system is best continues. FICO says that 90 of the 100 largest U.S. financial institutions use its score to make consumer credit decisions. Dahlheimer said the FICO is usually the best one because of its ever-improving calculations, but Ulzheimer said that FICO is clearly concerned about Vantage’s competition or it wouldn’t be offering free consumer access for the first time.
What’s a good score? While 700 to 720 used to be the benchmark, Ulzheimer said that with multiple scoring systems, consumers should strive for a score of 780 or higher.
“If your score is below that, you have some work to do,” he said.
As for ultra-vigilant consumers who worry that checking credit scores regularly will lower the number because of “too many inquiries,” Sprauve said it has no effect.