In a move that may remove a perceived wall of secrecy around credit scoring, an on-line mortgage lender plans to introduce today a new customer service that includes instant delivery of a borrower's credit score.
In a service designed to let customers monitor their loans, E-Loan will instantly show customers their Fair, Isaac & Co., or Fico, credit scores. The score, derived from various credit formulas, is used to determine loan eligibility and creditworthiness.Though lenders sometimes are willing to tell customers what their scores are, the site is believed to be the first to offer it as a regular part of its service.
"By showing people their Fico credit score we can break open the black box surrounding the credit scoring process to help people understand and manage their credit," Janina Pawlowski, chairman and cofounder of E-Loan, said. E-Loan said it is obtaining the scores from several credit bureaus it works with, but declined to identify them.
The new My E-Loan service sends advisories to borrowers when new loan products or changing rates can save them money. Ms. Pawlowski said the Fico scores were added in response to customers who, when told the Fico score prevented them from getting a loan, often said they had never heard of the score.
She said consumers then asked questions about the score that E-Loan representatives were unable to answer.
Credit scores have been a cause celebre for consumer groups, in part because lenders and the credit bureaus regard them as proprietary information, and have not made the formula public. Some borrowers and consumer groups have complained that the scores may be the basis of discriminatory lending.
But some in the credit industry argue that Fico scores, as mathematical representations of credit reports, are less meaningful to the consumer than the reports themselves.
Craig Watts, consumer affairs manager for Fair, Isaac. acknowledged that there is no official way for consumers to receive their Fico scores but said that the raw scores contain no information that could help borrowers improve their scores or their credit.
Mr. Watts said disclosures of the scores are problematic, because scores change rapidly. "It's not like an SAT score that will stay the same for years," he said. He explained that Fair, Isaac produces different models for a variety of industries and consumer markets.
"Knowing your score is 680 doesn't tell you you're going to get a loan or where in your credit report you have rough spots that you may need to work on," Mr. Watts said. He declined to comment on the E-Loan effort.
My E-Loan will give consumers their Fico score, interpret it, provide information on how score was determined, and offer generic advice on how to fix it, for free. It will also provide a full credit report, for a fee.
Ms. Pawlowski said people check their investment accounts every day but often ignore their debts, even though their debt often outweighs their assets. Through the account, she said, consumers will better manage their debt, improve their credit, receive better loans, and ensure their credit reports are accurate.
Rep. Carolyn Maloney, D-N.Y., expressed support for the efforts such as My E-Loan. "Consumers are the best monitors of the information that credit reporting agencies accumulate about them," she said, "and any effort to increase awareness of the right to correct credit history errors is positive."
Stephen Brobeck, executive director of the Consumer Federation of America, said his group has been critical of the credit scoring because consumers often do not understand what is involved, and as a result do not know how to improve their score to get credit.
"We would strongly support the dissemination of information about the creditworthiness of a consumer to that individual, particularly if that dissemination provides good advice about how to improve the [Fico] score," Mr. Brobeck said. "This initiative addresses that consumer need."
He argued that if a scoring process is being used, it's important to explain it to the consumer and how the he or she can improve the scores.
Norm Magnuson, vice president of public affairs for Associated Credit Bureaus, said that the effort is "a step in the right direction," so long as E-Loan offers more than just the three-digit score. "The question is, 'How to release the score to the consumer in a useful format?' " he said. "No one has been able to breach that gap."
Mr. Magnuson said that though Associated Credit agrees that consumers should know what their credit report contains and what it means, "the Fico score in and of itself doesn't tell you anything." He said that for E-Loan's service to help the consumer, it must offer more than what is already available - credit reports and the adverse-action explanations, which are given to consumers when they are denied credit.
"I commend them on their efforts," Mr. Magnuson said, "but it comes down to what kind of detail they are giving."