You and your creditor might not see eye-to-eye on your credit score. It could be that you are looking at two very different numbers.
That's why Congress last year asked the new Consumer Financial Protection Bureau to issue a report on whether credit scores sold to consumers are different than the numbers sold to creditors, and whether people are hurt by this. The CFPB released an initial report last week.
The agency says many consumers are still confused about scores. A survey by the Consumer Federation of America this year, the agency said, found that almost half of consumers didn’t know that a score was designed to predict the risk of them not repaying a loan.
The CFPB gives a good explanation of how credit scores work, but concludes that more data is needed. It expects to collect information on 200,000 consumers from each of the three major credit reporting agencies to see the difference between scores sold to consumers and creditors.
The potential harm to consumers is serious.
According to the CFPB report: “If a consumer obtains a score that makes the consumer believe that he or she is a better credit risk than lenders would determine, based on the scores lenders see, the consumer may apply for loansfor which they will not be approved. This will waste the consumer’s time and, possibly, money…
"If, on the other hand, the consumer obtains a score that makes him or her believe he or she is a worse credit risk than lenders would believe, the consumer may apply to lenders that offer less favorable terms. The consumer may apply for or accept loans with higher interest rates, for loweramounts, or with otherwise worse terms than other loans for which the consumer would qualify. A lender may not have an incentive to clear up the consumer’s confusion.”