Closing in on a key to the consumer kingdom

For many years now, three major credit reporting agencies - Equifax, Experian (formerly TRW), and Trans Union - have tracked consumer-credit habits. Each produces credit reports, which individuals can easily obtain via the Internet, phone, or mail.

But a lesser-known tool indicating a person's creditworthiness - the credit score - has been impossible to obtain. Companies that generate credit scores bound client companies to not reveal the figures to individuals. Few would-be borrowers even knew someone was assigning a number to their creditworthiness.

Even if they did, no one denied credit because of a low score could find out why they had flunked, or what they could do to improve their score. That is now changing.

Fair Isaac & Co., the largest generator of credit scores, is scheduled to join Equifax today in launching a credit-score service at two websites, www.myfico.com and www.equifax.com. For $12.95, the service, called Score Power, will present the user's credit score (calculated by mathematically massaging various numbers in a credit report), the top four reasons behind the user's particular score, and steps an individual can take to improve it.

Fair Isaac wasn't stonewalling before, suggests company spokesman Craig Watts, but trying to keep consumers from getting pieces of scores that by themselves might not make sense. Now that the company is ready to go public with the scores, he says, consumers will be able to get data they need to better judge their score against others, and see what they can do to make it better.

"It was good to see them change," Chris Larsen, CEO of E-Loan Inc., says of Fair Isaac. His Web-based lending business has been a big critic of the secrecy behind Fair Isaac's FICO scores, as they're known, and he has testified before California and federal lawmakers about opening the system. So as myfico.com prepares to reveal its data, E-Loan plans to roll out its own website in April (an address is in the works) where consumers can get what Mr. Larsen calls a "proxy FICO."

While Fair Isaac is the grandaddy in this field, having developed its first scores decades ago, upstarts such as qspace.com and Neuristics LLC are joining the fray. Experian will also introduce scores with creditexpert.com, and a confusingly similar creditxpert.com already "tells consumers how creditors look at them."

"That's great. That's competition," says Craig Fisher, who runs a website, www.creditaccuracy.com, from Dayton, Ohio, to keep an eye on credit scoring and reporting. Mr. Fisher says he hopes more scoring sites will bring greater accuracy to credit reporting, which has been criticized in the past for sometimes sloppy work.

E-Loan's Larsen complains that the nation's three largest credit bureaus use Fair Isaac to generate credit scores, yet they come up with scores that can vary by 50 points (FICO scores range between 300 and 850).

"Twenty points alone can make a 1.5 percent difference on an auto loan [rate]," says Larsen, whose company is still locked in dispute with Fair Isaac.

The explosion of companies willing to share the inside scoop on credit scores comes as state and federal lawmakers continue to scrutinize scoring. Legislators in Colorado, Connecticut, Hawaii, Massachusetts, and Washington have discussed reining in credit scores. Three bills on the subject came before Congress last year. And a law that takes effect in California July 1 gives consumers a right to view their credit scores. That law may be especially helpful with home mortgages, where the use of scores is practically universal.

In recent years, a version of the FICO score has been embraced by the insurance industry, where it is used to gauge whether auto- or homeowner-policy applicants are more or less likely to file a damage claim. In Iowa, enough consumers complained about the practice that the state Insurance Commission now forbids scores from being used as the sole factor in rejecting a policy.

Myfico.com and other score reports are good "first steps," says Larsen. He would like scoring companies to share all the factors they use in determining a score - such as, is a handful of credit cards with small balances better than one or two with large amounts due? And he wants to see scores available quickly and cheaply.

"They should be like stock quotes - free," he says.

(c) Copyright 2001. The Christian Science Monitor

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