1 in 5 consumers receive a different credit score than their lender

By Sean Coffey, MPA, Program Manager of ForeclosureHelpSCC

A recently released report by the Consumer Financial Protection Bureau raises some serious concerns about credit scores and the credit bureaus that create the scores.

Credit scores are important because they are a large of the equation in determining the price that a person will pay for credit. A person who is perceived as a good credit risk (as judged by a high credit score) will likely obtain a lower interest rate for a loan as compared to somebody who is a bad credit risk (as judged by their score).

That’s why the results from the study are so troubling. The Bureau studied 200,000 credit files from the three big credit bureaus (TransUnion, Equifax, and Experian) and found that about one in five consumers would receive a “meaningfully different score than would a lender.” This has harmful implications for consumers, because they could be either applying for credit that they can’t obtain (because the score they’re seeing is higher than the potential lender is seeing). Or, they could end up paying more for credit than they should because the score the consumer saw is lower than the score the lender saw.

Thirty of the credit bureaus (representing 94% of all bureaus) will come under the supervision of the Consumer Financial Protection Bureau on September 30, 2012, and it appears that there is a lot of work to be done.  In the mean time, the Bureau suggests that consumer shop around for credit and check their credit reports and correct any inaccuracies.

To learn more about this study, visit: “Analysis of Differences between Consumer- and Creditor-Purchased Credit Scores”
You can also read our previous blog post: “Rebuilding your credit after a foreclosure or short sale”

If you are a homeowner living in San Jose or Sunnyvale and are struggling with your mortgage, please contact ForeclosureHelpSCC, a program funded by the City of San Jose and the City of Sunnyvale at (408)-293-6000 or visit our website www.foreclosurehelpscc.org.  Our HUD-approved counselors can help you evaluate your options, learn more about federal and state programs that may help you with your mortgage issues, and will help you create a plan forward.

Please note: All content included in the ForeclosureHelpSCC blog is provided for information only and should NOT be considered legal or tax advice. If you have any questions, please feel free to contact us on our hotline: (408)-293-6000, or visit our website: www.foreclosurehelpscc.org