real fake credit scores

26 Sep 2013

I bet you don’t know your real credit score!

UPDATE BELOW: Credit Bureaus fined millions of dollars for lying about credit scores.

As an educated consumer, such as yourself, you’ve probably checked your credit report and credit score more than a few times. You’ve probably done so prior to a large purchase, such as an auto loan or mortgage. Relying on an online score, probably thinking it was your “real credit score”, you may have been surprised that your lender said your score is much different. Or, you may have seen the before an after scores from adding tradelines to your credit report. Here’s what you need to know…

How can I prove you don’t know your real credit score?

One way to prove you don’t know your real credit score is by checking multiple online scores. Go to credit check total, myfico, experian, transunion, etc. If you have enough money to buy all those fake scores, you’d see that they are all different. More importantly, none of these scores is your real credit score, and none of them are used by lenders.

You don’t know your real credit score because there are 100s of them.

In an awesome infographic produced by Credit Sesame, you can see the almost comical ridiculousness of credit score diversity. Beacon scores, FICO scores, vantage scores, plus scores… see for yourself:

how many credit scores are there
How many credit scores are there and what is your real credit score?

 

The degree to which you do not know your real credit score provoked federal inquiry.

The consumer financial protection bureau (the CFPB) conducted a study on the amazingly unnecessary amount of credit scores in existence. While their report considered many factors and other issues, we want to highlight two of them for you. In addition to not knowing your real credit score, they took it a step further to suggest you could be manipulated in this area of grey:

 

(1) Many scores exist in the marketplace: It is unclear the extent to which consumers understand that multiple scores exist in the marketplace. It is likely that many consumers incorrectly believe that the scores they purchase are the same scores used by lenders in evaluating their applications for credit. As described throughout this paper, literally dozens of different credit models are used by lenders. FICO alone has over 49 credit scoring models. Consumers additionally can purchase a range of educational scores or VantageScores.

(4) Providers of educational scores should ensure that the potential for score differences is clear to consumers: This study finds that for a substantial minority of consumers, the scores that consumers purchase from the nationwide CRAs depict consumers’ creditworthiness differently from the scores sold to creditors. It is likely that, unaided, many consumers will not understand this fact or even understand that the score they have obtained is an educational score and not the score that a lender is likely to rely upon. Consumers obtaining educational scores may be confused about the usefulness of the score being sold if sellers of scores do not make it clear to consumers before the consumer purchases the educational score that it is not the score the lender is likely to use.

Why don’t fake credit scores (or “FAKO score”) factor in authorized user tradelines?

The quick answer is that they don’t have to. Under current law, lenders must consider authorized user tradelines. Therefore, if the score used by lenders (or “real FICO score”) does not consider authorized user tradelines, the lenders would not use those scores. Therefore, FICO would lose a LOT of money from lenders. Online scores are not used for lending purposes. Therefore, online credit scores do not need to factor authorized user tradelines. So, once you purchase tradelines from us, please understand that only your “real credit score” will be affected. Meaning, only the scores lenders will use will see the real impact of the tradelines. You might see a little gain on the consumer or “online” scores, but the real impact is only seen on the real credit score side of things; lender credit scores.

UPDATE:

From TheAtlantic:

credit bureaus lie about credit scores

From Time:

all three credit bureaus lie about credit scores

7 thoughts on “I bet you don’t know your real credit score!”

  1. I still don’t understand this. If I go to Equifax.com or MyFico.com, am I not getting my score from Equifax or FICO? If not, what is this score and why would it not be considered “real” if it comes directly from Equifax or FICO?

    1. Fantastic questions. The world “real” can mean many things. In terms of credit, we should consider “real” anything that a lender is going to use. Otherwise, why would you care about a score if a lender isn’t going to use it. For example, if I created a Superior Tradelines’s Credit Score, would you buy it for $15.00? I wouldn’t, and I own Superior Tradelines 🙂 The point is, when you go to Equifax.com, Transunion.com, Experian.com, or even MyFico.com, these are not “real” credit scores. MyFico.com is the closest, but unless the scores are being used for lending purposes, the companies are not required follow certain rules and regulations. They can call it an “educational” score and sell you snake oil (yes, even MyFico.com). You can prove this to yourself. The next time you apply for credit (credit card, mortgage, car loan, etc.) ask them for your scores. Then, go pull your reports and scores online (anywhere you want). 100% of the time, the scores are going to be different.

      One very relevant example. Under the Federal Reserve Board Reg. B (and the Equal Opportunity Act of 1974), lenders are “required” and “shall” consider authorized user tradelines when evaluating credit. If you are buying scores online, scores that are NOT being used for lending purposes, the score providers do not have to consider authorized user tradelines. So, we could add tradelines to your file and your scores could shoot up 100 points from a real tri-merge hard pull report pulled by a lender, yet your online scores could stay the same.

      I know this is confusing, but it seems to me that banks, bureaus and government agencies seem to want it to remain this way. Keep asking question, Brett!

      Thanks,

      Robbie

  2. This is fascinating! Thanks for all the great information on your site. So, for instance, if you add a tradeline that boosts my hard pull/tri-merge but not an online score, how will I be able to determine the effect of that tradeline (to see if it is adequate to support whatever my anticipated increase or goal was)? How do we determine that the “real” one went up adequately before approaching the big car purchase or mortgage application? Do you have access to those reports…do I? Thanks!

    1. Wow, great question. It is clear you read and completely understand what was written. Since only lenders are authorized (with a permissible purpose) to pull your credit (and credit scores), that is the only way to do it. There are round about ways of “verifying” your new scores, but this would add a hard pull to your credit report and, in some cases, could bring down your score by a few points. So, to answer your question 1) you can’t easily verify it prior to an application and 2) you don’t really want to…

      How do we know your “real” scores go up? We see the result of client goals over and over again (thousands of times). The process is all algorithmic and engraved in law… it’s not a “chance”, it is just how it works; if you add positive credit history with an appropriate age, limit, balance, etc., your scores will go up.

      Our experience comes into play when we apply the facts above with an individual’s unique situation. We make a tradeline recommendation based on your current credit situation and goals.

      You asked a very complicated (yet noteworthy) question, so I hope this answer was what you were seeking. If not, ask me further questions.

      Thanks,

      Robbie

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