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That $20 FICO score you bought might be useless

FICO demands $20 to see your credit score. What they're not telling you: The score your lenders are using to judge you may be entirely different.

By MSN Money Partner Sep 27, 2013 3:28PM

This post comes from Trisha Sherven at partner site Money Talks News. 

MSN Money PartnerThe sales pitch on Fair Isaac's myFICO website is simple enough:

The FICO® Score is a number that summarizes your credit risk. Lenders use it to make credit decisions, such as the interest rate you get when you apply for a loan.

Being able to see what potential lenders see: That's why so many Americans are willing to pony up $19.95 to see their credit score. And if you want to see it from each of the big three credit reporting agencies, you'll pay three times, shelling out nearly $60.

When it comes to credit, the stakes are high. According to FICO, a low score -- say, 620 -- means paying 5.7% on a 30-year mortgage loan. A great score -- say, 760 or higher -- could qualify you for a much lower rate of 4.1%. Borrow $200,000, and over the life of the loan, the lower interest rate will save $52,000 in interest -- enough to put your kids through college.

So paying to see your credit score seems like money well spent. Until, that is, you discover you're paying for a false sense of security, because the score you're buying may not resemble the one potential lenders see.

How FICO scores work

FICO uses a proprietary formula to calculate your three-digit credit score, which ranges from 300 to a perfect 850. It will tell you the basics of how your credit score is determined (you can read about it here) but in the end it's kind of like the original KFC recipe: You can figure out the basic ingredients, but you couldn't duplicate it yourself.

FICO isn't just selling credit scores to consumers. It's also marketing them to lenders. But when your potential lender buys a FICO score, the lender has a lot of industry-specific scores to choose from. For example, there are scores customized for mortgage lenders, car dealers, credit card issuers and many others.

According to Consumer Reports, FICO serves up 49 different scores to lenders, but only two to consumers. So when you apply for a loan, it's likely your lender will be looking at a score that’s different from the one you buy.

In short, you might be paying for original recipe and your lender might be ordering extra crispy.

Why you should be mad

The Consumer Financial Protection Bureau studied (.pdf file) 200,000 credit files from each of the three major credit reporting agencies. One finding: In 19% to 24% of cases, consumer scores differed from lender scores sufficiently to land the consumer in an entirely different credit category.

Result? You could think you're in the highest category, only to find you're not. And as we pointed out above, a lower score could cost you thousands in extra interest, especially on large loans.

We contacted FICO to ask how a consumer could rely on a FICO score, given the government findings. Here's part of their response:

It's true that there are multiple versions of the FICO Score, including versions for different types of credit products such as mortgages, credit cards and auto loans. But these versions are all based on the same underlying mathematical blueprint as the score sold to consumers on

So while a person's FICO Score can vary depending on which version the lender is using to make a decision, it's by far the most reliable and accurate depiction of a person's credit health they can find anywhere, and is the best way to help gauge how lenders will view a consumer's creditworthiness.

That's not the entire response, but nothing they provided acknowledged the problem: People are being sold FICO credit scores under the assumption they're identical to those being used by lenders, and they're not. Furthermore, FICO knows this and isn't disclosing it.

This is why many consumer advocates, including Money Talks News and Consumer Reports, are calling for changes. Here's what Consumer Reports said in a recent article called "Don’t buy useless credit scores":

We see no point in buying any consumer credit scores, given that they’re not the same ones used by lenders. But if you do, and a lender or insurer later tells you your real score is lower or higher, do what you'd do with any product that doesn't deliver: Demand a refund.

Consumer advocates aren't the only ones complaining. So are lawmakers. The Fair Access to Credit Scores Act of 2013 is a bill now in Congress that would amend the Fair Credit Reporting Act to allow consumers a free, accurate credit score once a year, along with their free annual credit report from

Right now, federal law requires that you can see the actual credit score a lender sees and not be charged:

  • If you were turned down for credit.
  • If you got a higher interest rate on a loan because of your score.
  • If you received unfavorable terms on a credit card.

Here's what the proposed law would do, according to a press release from the bill's sponsors:

This bill would expand upon that provision to provide all consumers with an annual credit score to complement their free annual credit report.
Also, this measure would ensure that the free annual credit score received by consumers is a reliable score actually used by lenders, rather than an "informational score" of unknown reliability. It would give consumers access to all scores generated in the previous year and stored in their credit files -- information that lenders have accessed about the consumer's individual creditworthiness -- instead of consumers seeing only those scores that resulted in "adverse actions," as provided by current law.

What you can do

In addition to contacting your elected representatives, there are ways you can fight back:

  • Avoid buying scores, and don't rely too heavily on those you pay for.
  • As Consumer Reports suggests, demand a refund if the score you bought varies widely from the one your lender uses.
  • Before you agree to a loan or insurance rate, ask to see the score the lender used.
  • Check your credit in other ways, like the free annual credit reports you can get at Get a picture of your credit throughout the year by choosing a different credit bureau report every four months.
  • Support the Fair Access to Credit Scores Act of 2013 by clicking here to sign a petition.

Do you think we should get free, accurate credit scores? How do you feel about paying for a score that may not be reliable?

More on Money Talks News:

Sep 27, 2013 7:19PM
All credit scores are scams.  The banks do what they want to do regardless of what your score may be at any given time.
Sep 27, 2013 3:49PM
It's all a scam ?  Gee, that's a big surprise.
Nov 11, 2013 12:36AM
There are more than two scores available to consumers. In fact there are at least five available to individuals according to this article: 
Sep 30, 2013 12:38PM
The main reason you shouldn't be paying $20 to get your credit report is because the credit scoring agencies are required to provide you with a free credit report something like once per year if you request it.

It takes some careful browsing to filter out all the companies trying to charge you for something you can get for free, but if you do some digging, you can get your credit report for free.

I don't think you get an actual score for free, but you can be sure that if you have problems on your credit report showing that you're not paying your bills and debts, your credit score is going to be low.  In that case, perhaps you should focus on catching up on what you already owe before taking on a mortgage anyway.  If your report says you're making regular payments and current on all your debts, your score should be fine.

If you want a good credit score to help with a mortgage application:
#1 keep up on your existing bills and debt payments
#2 check your free credit report and resolve any inaccuracies

Don't waste your money on a credit score.  Focus on cleaning up issues on your free credit report instead.
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