Disclosure of Credit Scores

One more signal of the pressure on creditors to disclose credit scores surfaced in May when the California Senate voted 31-1 in favor of a bill that would require disclosure of scores to consumers shopping for mortgages. Faced with mounting pressure from consumer groups, legislators and its own creditor customers, the largest commercial scorecard builder in the U.S., Fair Isaac & Co., announced in early June that it would begin disclosing the types of factors that influence consumer credit scores as well as the relative importance of factor categories.

Moreover, beginning in July, 2000, the company said it would allow consumers to log on to the Fair, Isaac website and obtain their score online. Details of the online score access have yet to be finalized. Calculation of a consumer's score requires access to their credit report, so Fair Isaac is in discussions with the major credit bureaus (Trans Union, Experian and Equifax) to determine ways to facilitate direct access, with the consumer's permission.

Soon after the disclosure announcement, Fair Isaac posted a detailed statement to its website explaining the factors and relative weighting of FICO credit score components. The discussion highlights five major categories of factors: Payment History, Amounts Owed, Length of Credit History, New Borrowing Activity, and Types of Credit in Use. Within each category the discussion mentions several variables which contribute to the score. For example, under the New Credit category the specific attributes mentioned are 1) How many new accounts do you have? 2) How long has it been since you opened a new account? 3) How many recent requests for credit have you made, as indicated by inquiries to the credit reporting agencies 4) What is the length of time since credit report inquiries were made by lenders? 5) Do you have a good recent credit history, following past payment problems? After each question there is additional discussion explaining the rationale for the use of the factor. Occasionally, the discussion points out what is not considered. For example, with respect to inquiries a consumer's own request for a copy of their credit report does not affect their credit score, nor do lender requests prior to making pre-approved offers or for monitoring existing accounts.

Fair Isaac says that the approximate percentage weight given to each category of variables in determining the consumer's overall score is as follows: Payment History, 35%; Amounts Owed, 30%; Length of Credit History, 15%; New Credit, 10% and Types of Credit in Use, 10%. They advise consumers that their score takes into account all categories of information (both positive and negative) and that it incorporates only information in the credit report. Consumers are reminded that scores do not consider ethnic origin, religion, gender, marital status and nationality, all of which are factors prohibited as a basis for granting credit under U.S. law. For more details on the score disclosure program visit the Fair Isaac website at www.fairisaac.com.