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5 reasons credit scores may not matter

As consumers become more savvy about their scores, it may be time to look instead at the underlying factors that go into them.

By MSN Money Partner Oct 5, 2012 2:32PM

This post comes from Barry Paperno at partner site logoCredit scores and the confusion they cause have once again stepped into the national spotlight with the release of th Consumer Financial Protection Bureau's "Analysis of Differences between Consumer- and Creditor-Purchased Credit Scores" (.pdf file). It's part of the Dodd-Frank Act requirement that the CFPB compare credit scores sold to creditors and those sold to consumers to determine whether differences between those scores put consumers at a disadvantage.


Image: Woman with computer (© Jose Luis Pelaez/Getty Images/Getty Images)The study reported that as much as 73% to 80% of the time, an "educational" score obtained from one of the many consumer websites is likely to place the consumer within the same "credit-quality category" as a creditor-purchased score -- many of which are not available to consumers.


While many reacted to the report with surprise that up to one in four scores for consumers is significantly different than the ones lenders see, some of us who have advocated for years for more score disclosure were surprised that the scoring models were that accurate. Such results indicate a strong correlation between the educational and creditor-purchased scores.


While not necessarily the intent of the CFPB study, these rather unexpected results reveal that there just may be too much emphasis placed on credit scores nowadays, while the underlying credit report information and score factors that accompany most credit scores -- both educational and lender purchases -- can be just as important as, or more important than, matching the three-digit number a lender may be using.

With a goal of getting past credit scores by refocusing on credit report accuracy and using score factors for improvement, here are five reasons why your scores may not matter all that much anyway:

  1. If your credit is being reported accurately, just about any score based on your credit bureau information will provide a look into your creditworthiness as seen through the eyes of a lender.
  2. The conventional mantra of paying on time, keeping debt low and avoiding opening new accounts not only will help to improve any credit risk score, but also provides a great general financial management strategy to follow, score or no score. Understanding where your credit report is falling short is important to understanding how to improve your score.'s Credit Report Card gives you a grade for each of the five categories so you know where you stand.
  3. In addition to credit bureau risk scores, lenders often use other types of scores, such as behavioral scores and custom application scores, which are not likely to be available to consumers under even the best score disclosure scenario.
  4. Credit scores lose their freshness very quickly because they are based on the underlying data, which can change daily. So, even if the consumer is using a score derived from the same formula as the lender's, if it isn't of the same vintage it's not likely to be the same score.
  5. Credit score interpretation and other lending criteria differ from one lender to another, and they can change frequently within the same lender's credit programs. There is no realistic scenario where score "cutoffs" or other lending criteria will be available to consumers, so the mystery surrounding credit granting is all but guaranteed to continue.

Consumer access to credit scores over the past decade has helped consumers become more savvy and empowered than ever. It may now be time to reassess the importance of credit scores as the main consumer empowerment tool, and instead refocus on the credit report, score factors and managing credit responsibly.


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