Sept. 26, 2012 – One out of five consumers would likely receive a meaningfully different credit score than his or her creditor would receive to evaluate creditworthiness, according to a study released Tuesday by the Consumer Financial Protection Bureau, which begins supervising some CRAs at month’s end.
The study, a follow-up to one issued in July 2011 that described the credit scoring industry, types of credit scores and potential problems for consumers, involved analysis of credit scores from 200,000 credit files from each of the three major nationwide CRAs: TransUnion, Equifax and Experian. The study identified differences in how the scores are built and their impact in evaluations of different segments of consumers.
“This study highlights the complexities consumers face in the credit scoring market,” said CFPB Director Richard Cordray. “When consumers buy a credit score, they should be aware that a lender may be using a very different score in making a credit decision.”
The CFPB notes that the credit scores consumers purchase are “educational” scores. If they are meaningfully different than the ones creditors use, that means consumers may qualify for different credit offers, either better or worse, than they would expect to get based on the score they purchased. The bureau says consumers, when evaluating the credit score they receive, shop around for credit to get the best deal; check their credit reports for accuracy; and dispute report errors.
The CFPB notes it will begin supervising CRAs this Sept. 30. It has determined by regulation that it has supervisory authority over some 30 companies that account for about 94 percent of the market’s annual receipts. (These providers are defined as “larger” market participants and thus subject to CFPB oversight.)
“The Bureau’s examiners will be looking to verify that consumer reporting companies are complying with federal consumer financial law, including that the companies are using and providing accurate information, handling consumer disputes, making disclosures available, and preventing fraud and identity theft,” it says.
The CFPB’s final rule on “larger” participants in the credit reporting market is explained in a NAFCU Final Regulation (members only).