PMC Mortgage Lender's Blog

The Consumer Financial Protection Bureau (CFPB) acknowledged in a report last week just how hard it is for consumers to purchase or obtain the same credit scores that their lenders are using to evaluate their creditworthiness.

However, it's very easy for consumers to buy credit scores that have little or no meaning in the real lending world.

"A consumer, unaware of the variety of credit scores available in the marketplace, may purchase a score believing it to be his or her 'true' (or only) credit score, when in fact, there is no such single score," the CFPB said in its 20-page report published July 19, 2011.

Yet, borrowers hungry to know their credit scores have helped pushed sales of credit reports and scores to more than $1 billion. “Sales to consumers make up approximately a quarter of the U.S. revenues of the credit bureaus and their affiliates,” the report stated.

When borrowers find out from their lender they have a different score than the one they purchased directly, they can become confused. The CFPB report pointed to some key factors why this happens:

• The consumer may apply for a loan with a lender that uses a different scoring model than the one purchased by the consumer.

• The consumer and lender may obtain scores based on credit report data from different credit bureaus.

• The data in the consumer's underlying credit report may change significantly between the times when the consumer buys his or her score and when the lender obtains the consumer's score.

Congress mandated the CFPB report through passage of the Dodd-Frank Wall Street Reform Act in July 2010. As of July 21 this year, the agency will begin to police banks, credit unions, debt collectors, payday lenders and other financial services companies.

Consumers who are denied loans or given less-than-ideal terms will receive a federally mandated free credit report. "Consumers will then begin to see and receive many more credit scores than they had been exposed to previously," the CFPB said.

Half of consumers surveyed earlier this year have no idea that a credit score is a predictive tool used to determine the likelihood that someone will fail to repay a loan. Credit scoring company VantageScore and the advocacy group Consumer Federation of America funded the survey.

Consumer advocates warn that borrowers need to be careful not to spend money on a score that will be of little use to them if they expect to see their creditworthiness the same as lenders see them.