access to free credit scores empowers consumers

Access to free credit scores empowers consumers

Date: June 26, 2020

In the not-too-distant past, consumer credit scores were tools used only by lenders. Consumers learned their scores when notified about certain lending decisions, or if they paid to obtain them, but most consumers were unfamiliar with their own credit scores and with credit scores in general. Nowadays, the script has flipped. Free credit scores (and the credit reports upon which they are based) are widely available at the click of a mouse.

Earlier this month I spoke on this subject to card issuers attending the first annual Consumer Credit Summit at Card Forum, and I shared the results of a national survey VantageScore commissioned. The survey, which encompassed a representative sampling of the U.S. population, found that Millennials—who have grown up online—expressed greater familiarity with their credit scores and have accessed them more often than other generations.

The survey also found, ironically, that inclusion of credit scores on credit card statements ranks low on a list of consumer priorities for consumers, and that interest rates and other incentives rank higher in importance. The wide availability of free credit scores online undoubtedly is contributing to these trends.

The trend is most certainly a net positive for consumers. Providing consumers with scores, for free or even for purchase, helps them understand their creditworthiness—especially when the scores are paired with information about the credit behaviors that influence scores and how lenders might interpret them.

And while multiple models and different credit bureaus may contribute to some variance in scores, ultimately most generic credit scores are built on similar statistical techniques designed to predict whether a borrower is likely to pay back a loan. In other words, a low-risk consumer will likely have a high score regardless of the model or bureau.

And guess what? Consumers actually get it.

Across the board, consumers take a positive view toward having multiple credit scores, from different models. In fact, the aforementioned survey found that only four percent of U.S. consumers who have been scored by more than one credit scoring model viewed having multiple scores negatively.

So let’s keep this financial education train a-runnin’, and be sure we, as an industry, focus on a few things:

  • When scores are being given away, let’s all be sure to properly identify the model that derived it and the bureau that supplied the data used to calculate it.

  • Be sure to connect each credit score to the underlying credit report upon which it is based.

  • Include deep contextual information about the score to help the consumer understand how a lender might interpret it.

While I’m on the subject of consumer education, I would be remiss if I didn’t plug www.CreditScoreQuiz.org, the educational website we created in partnership with Consumer Federation of America. I encourage everyone to take the quiz whether you are a consumer just starting out in the credit world or a seasoned industry vet.

Regards,

Barrett Burns