The Consumer Financial Protection Bureau (CFPB) has ordered two of the nation’s three largest credit reporting agencies, Equifax and TransUnion, to pay more than $23 million in fines and restitution for the alleged deceptive marketing of their credit monitoring subscription products. The remaining credit reporting agency, Experian, has not been fined as part of the CFPB’s action.
In a statement released by the CFPB earlier this month, director Richard Cordray stated, “TransUnion and Equifax deceived consumers about the usefulness of the credit scores they marketed, and lured consumers into expensive recurring payments with false promises. Credit scores are central to a consumer’s financial life and people deserve honest and accurate information about them.”
But There Really Is More Than One Credit Score!
The CFPB alleges that TransUnion and Equifax deceived consumers about the value of the credit scores they were being sold. The scores these agencies sold to consumers were “not valuable,” according to the CFPB, because neither score — TransUnion’s VantageScore and the Equifax Credit Score — would typically be used by lenders when making loan approvals.
The problem with the CFPB’s position is that the scores sold to consumers are, in fact, valuable, because they’re commercially available and are sometimes used by lenders (if not as often as the more commonly used FICO score).
Further, credit scores, even if they’re not the version being used by a lender, can still be an effective tool to help consumers track the health of their credit. If you have a low FICO credit score, then your VantageScore or your Equifax Credit Score will be low as well. If you take steps to improve your credit, and your VantageScore credit score or your Equifax Credit Score begins to rise, then your FICO score will almost certainly rise as well.
All credit scores, whether they’re free or fee-based, have some value — as they are directionally accurate and tell the same story about your credit risk.
Whether or not the scores consumers purchased from TransUnion and Equifax would be the same credit scores pulled by a lender depends on what scoring system that particular lender uses. Some lenders use FICO, some use VantageScore, some use the Equifax Risk Score, and some use none of them.
However, if a consumer were to have two different lenders pull his or her credit scores on the same day, they would likely receive two entirely different sets of numbers. That’s the nature of our credit scoring environment, which is filled with hundreds of different score options. Even the CFPB acknowledged in their press statement that “No single credit score or credit score model is used by every lender.”
The truth is that no one has a single credit score. Instead there are hundreds of different credit scores which are commercially available to consumers and lenders today. It’s true that FICO enjoys the dominant market share, but there are many lenders that purchase credit scores from FICO’s primary competitor, VantageScore, as well.
Fines and Required Changes
In addition to $5.5 million in fines and over $17.6 million in restitution levied upon Equifax and Trans Union by the CFPB, the two credit reporting agencies are also being required to “truthfully represent the usefulness of credit scores [they] sell” moving forward.
In other words, the agencies must disclose to consumers that the credit scores they are purchasing may not be the same scores which would be used by a lender. But that can be said about any score sold to or given to a consumer.
- Comparing Your Many Credit Scores
- Want Your Free FICO Score? Five Credit Cards That Will Show It to You
- Why You Need to Check Your Credit Report With All Three Credit Bureaus
John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. He has written four books on the topic and has been interviewed and quoted thousands of times over the past 10 years. With time spent at Equifax and FICO, Ulzheimer is the only credit expert who actually comes from the credit industry. He has been an expert witness in over 230 credit related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit.