EXPERIAN BEING SUED

EXPERIAN BEING SUED

There was a lawsuit filed recently, in the southern district of California regarding credit scores. Specifically, the lawsuit accuses www.consumerinfo.com, a subsidiary of Experian, of deceptive advertizing to consumers. At issue is the PLUS score often sold for $14.95 with an Experian credit report - which the lawsuit says is advertised like a credit score as used by lenders to determine a consumer’s creditworthiness.

This really is only the tip of the iceberg. With so much concern today about credit reports and what's on it, along with credit scoring; many people are going to the internet to find out what their score is. The problem is that the scores they sell mean very little.

The scores a lot of the systems use has little relevance to what is used in the mortgage industry - the FICO score. The public is unaware that what most industry experts utilize is based on the 850 scoring model. While many of the scores currently for sale depend on similar sets of data, there are significant differences. As an example, VantageScore, which is sold to consumers by Experian and TransUnion, ranges from 501 to 995, while a credit score sold by Equifax ranges from 280 to 850, and FICO scores range from 300 to 850.

According to the lawsuit, there's more to it. While banks and other lenders may subscribe to or access many different scores, the FICO score, created by Fair Isaac Corp. , is certainly the most widely-used, by more than 90% of lenders, according to the lawsuit. Its popularity is in part due to the fact that Fair Isaac developed the initial general risk credit score in the late 1980s.

Here is what happens: It is drummed into everyone’s head that what is needed for a home loan for FHA is 640 (in most cases). The consumer goes online, gets their credit report and buys the scores. They report they have a 646 score - - - wonderful! They can get an FHA loan! Wrong. What is not disclosed to them is that this score is based on the 995 model. If this number were to be translated into the FICO scoring model it would be 551 - - - not even close!

If you believe in the FICO model, that is fine. What is demonstrably a crime, in my humble opinion, is selling people scores that mean virtually nothing. Why not base their model on a 500 scoring system? Then people would have a score well under the FICO and their product would not sell - the bureaus would not sell false hope.

I say Good Luck in the Lawsuit.  The people deserve the truth.