WASHINGTON-Most consumers remain unaware of changes in credit score models that may affect them.
According to new research by the Consumer Federation of America (CFA) and VantageScore Solutions, on average consumers answered 60% of questions related to credit scores correctly, but most did not know who makes credit scores available, what a strong score is, and what's the financial cost of a poor score.
The two organizations noted that there are a growing number of both generic and lender-specific credit scores, few of which are identical. Even generic scores may vary widely depending on both the credit report and scoring system used. For instance, scores based on credit reports from one of the three main credit bureaus-Experian, Equifax, and TransUnion-may utilize either of the two main scoring systems-FICO with its range of scores from 300 to 850, or VantageScore with its range from 501 to 990.
"A 700 score may be either a good score or only a fair score depending on the scoring system," the researchers said, noting scores available usually reveal this relationship. Moreover, the VantageScore scoring system provides a letter grade along with a numeric score. Most scores currently used by mortgage lenders and made available to borrowers use the FICO scoring system.
Government rules going into effect this July will require greater disclosure of credit scores. "The new score disclosures will be most beneficial to those who understand the new credit score marketplace," said Barrett Burns, President and CEO of VantageScore Solutions.
