CREDIT BUREAUS PLAN RATINGS FRIENDLIER THAN FAIR, ISAAC'S Under increasing pressure to disclose more information about how people are evaluated in the underwriting process, two credit bureaus said they plan to develop credit ratings that consumers would see when they request a copy of their credit report. Trans Union Corp. of Chicago said on Monday that it would create a credit score, along with an explanation of how the score was derived, for consumers. Trans Union sells a separate score to lenders and also distributes scores developed by Fair, Isaac & Co., which produces the majority of credit scores -- called Fico scores -- that lenders use to approve or reject loans. The new score is meant to show consumers how they are viewed by lenders. "This score is going to give a lot more information than consumers have today," said Walter Rothschild, executive vice president of marketing for Trans Union. The score will show where a consumer fits in the general population, he said, as well as steps to maintain healthy credit and "what types of behavior will improve a score." Experian Inc. will unveil a similar product later this year, the company said in a statement earlier this month. The contentious issue of disclosing credit scores has been simmering for several years, but the debate drew renewed attention a few weeks ago, when Fannie Mae chairman and chief executive Franklin D. Raines, calling the Fair, Isaac scoring system "opaque," announced that Fannie would replace the Fico score with its own. Then in April E-Loan Inc., an online mortgage lender which had been disclosing Fico scores to consumers since February -- and was hailed for doing so -- was forced to stop distributing them. Fair, Isaac, based in San Rafael, Calif., had not known E-Loan was divulging the scores. Its policy bars credit bureaus from revealing Fico scores to anyone but a loan officer. Finally this month legislation was introduced in California by state Sen. Liz Figuero, a Democrat, that would require disclosure of credit scores when consumers shop for mortgages. An amendment to the bill was approved to make credit scores available on consumer credit reports for a $4 fee. Mr. Rothschild said these recent developments contributed to Trans Union's decision to announce its plans now, but that the issue has been under discussion for more than a year. "Our decision was based on a multitude of market factors," including consumers' savvy in using the Internet to make financial decisions, he said. Trans Union plans to deliver credit reports along with the consumer credit score via the Internet. There will be no extra charge for the score. A credit report costs $8. Though Trans Union's consumer score will not be the same one it develops for lenders or distributes on behalf of Fair, Isaac, it will predict the same thing: the risk associated with lending to a particular consumer. Experian drafted a statement in response to some of the questions that the E-Loan situation raised. In the statement Experian said, "the lack of information and education has made many consumers curious and apprehensive about credit risk scores." Experian said it would introduce a consumer credit score in the third quarter this year. Equifax Inc. of Atlanta is approaching the issue differently. Bill Catucci, group executive vice president for Equifax North America Information Services said, "Trans Union's current unilateral action appears premature. The issue involves not only credit reporting agencies but also credit grantors and credit modeling companies as well. This uncoordinated action (by Trans Union) could very well cause harm and confusion to consumers, causing them to take action to 'better' their score when their actions without thorough understanding could have the opposite effect." Mr. Catucci said "the industry should develop a solution to this score-disclosure issue" and that Equifax was working towards that end. A spokesman for Fair, Isaac said no one was available to comment for this story.
I think consumers will continue to raise a stink until we know we are seeing the same reports and scores that the lender is seeing. Evidence so far is that we are not. They want to placate us while maintaining their veil of secrecy.
