McLEAN, Va. (8/8/11)--Myriad credit score ads flooding the airways and Internet not only are confusing and costly, they’re misleading: In many cases, the score you get is higher--or lower--than the credit score your lender uses to grant you credit. A study released last month by the Consumer Financial Protection Bureau, Washington D.C., warned that consumers unaware that there are many credit scores available might think the score they get is their one true credit score. In fact, you could have widely divergent scores from different agencies (USA TODAY
July 25). Promotions for “free” credit scores are simply the hooks to get you to sign up for credit monitoring, identity theft protection, or other services that cost anywhere from $15 to $30 a month. Worse, the score you get might be so misleading that you could have unrealistic expectations when you visit a lender. Scores from credit reporting agencies often are different from the credit score lenders use. Even credit scores bought through AnnualCreditReport.com
could be misleading, according to the report (Mint.com
Aug. 1). If your credit is stellar, you’ll likely have a high credit score no matter what score lenders use. And if you have really bad credit, the same is true: All your scores will be low. But if you fall between the two extremes, as most consumers do, it’s likely the score you get is different from the one your lender uses. Why does that matter? It affects your cost of credit. So follow these guidelines:
* Know your rights. If you’re turned down for a loan, or you’re approved for a loan with a higher interest rate than the rate offered to the lender’s best customers, a new law says the lender must provide you a free copy of your credit score. Lenders also must explain what factors affected your score. * Check out your free, no-obligation credit profile. Visit Credit Karma, Quizzle, Credit Sesame, and Credit.com websites for a general sense of whether you’re an excellent, average, or poor credit risk. * Buy FICO. This is the score most lenders use. Fair Isaac Corp. sells the FICO credit score for $19.95 at MyFICO.com. * Order your free credit reports. Visit AnnualCreditReport.com and make sure the information in your Experian, Equifax, and TransUnion reports is accurate. Correct errors that could have a sinking effect on your credit score. And steer clear of FreeCreditReport.com; if you don’t cancel the “free” trial membership in time, you’ll be billed monthly for services you may not want or need.
For more information, listen to “Does Your Credit Score Tell the Truth About You?” in the Home & Family Finance Resource Center