Home mortgage and credit industry experts say it could be the start of something big: A lender is providing free, round-the-clock access to current credit scores, plus practical advice on how to improve them.
Providian Financial Corp., a large San Francisco-based credit card issuer, plans to give all its customers unlimited views of their credit scores, anytime they choose, at no charge. The service also will provide the two top reasons the scores are not higher, plus calculations of how specific credit-related steps could raise or depress the score.
Cardholders also will be able to sign up for free automatic e-mail alerts anytime their scores move by more than 10 points, a key early defense against identity theft crimes.
Providian has begun rolling out the credit service for all new Visa card customers, and it will soon extend it to its existing 10.5 million cardholders. The program supplies the most widely used form of score -- FICO -- computed from monthly credit file data at Trans Union LLC, one of the three national credit repositories. Providian says its objective is to demystify credit scores by making them accessible at no direct consumer cost. Not surprisingly, it also hopes to pull in large numbers of new credit card accounts and gain market share.
What is especially significant about Providian's concept is that other lenders, mortgage servicing companies and banks are almost certain to jump in with competing programs. Most big mortgage companies and banks periodically check their customers' credit scores as part of routine quality control and auditing. Score movements help them gauge the default potential of their home mortgage borrowers and other accounts. But they never show the scores to the people most vitally affected by them -- their customers.
Alan Elias, a Providian senior vice president, said that's not the way it should be. Keeping scores secret needlessly keeps borrowers in the dark about a critically important aspect of their financial situations. On a cost basis, it's a no-brainer, he said. "We already buy these scores once a month anyway," he said. "We have them. Why not share them with our customers?"
"What a great idea," said Terry Clemans, executive director of the National Credit Reporting Association, which represents independent credit reporting agencies. "Every company that pulls scores for quality control audits ought to do something like this."
Mortgage servicing firms in particular, Clemans said, order millions of scores on homeowners a year, often in quarterly batches. High-volume, wholesale purchase contracts such as these cut the price of credit data dramatically below what consumers themselves pay retail -- 30 to 40 cents for the biggest corporate users, compared with the $12.95 or more that individual homeowners might pay for a credit report and FICO score.
Could some of these giant banking firms be planning consumer-friendly, free score-access programs using bulk-cost credit data similar to Providian's? The answer appears to be yes. Scott Mitic, a vice president with Fair Isaac Corp., developer of the FICO score technology, declined to identify specific companies, but confirmed that other large financial institutions could roll out their own versions of score-access services in the months ahead.
That's excellent news for potential home buyers, because knowing your FICO score and knowing how to improve it are two keys to successful home buying and mortgage borrowing. High FICO scores give you access to the lowest interest rates and fees, not only on your mortgage but also on your car loan, credit cards and most other forms of borrowing. Low FICO scores, by contrast, cost you big bucks on everything from home equity loans to hazard insurance and auto insurance.
FICO scores are used by rental apartment screeners to evaluate tenant applications. Many employers also order them on potential hires. Yet despite their widespread use and importance, research shows that the vast majority of consumers have no idea about their scores. Those who do frequently pay a price: They buy their scores online, along with their credit reports, at the repositories' Web sites or from Fair Isaac's site, MyFico.com.
Congress passed legislation last year giving all consumers the right to request and receive one free credit report per year from the three national repositories -- Equifax (www.equifax.com), Experian (www.experian.com) and Trans Union (www.transunion.com). The legislation did not mandate free annual credit scores, however, and the earliest free credit reports are not expected to be available until late this year.
But who knows? Maybe lenders themselves will fill the free credit-score void, and allow home buyers to shop smart -- with their scores in hand.
Kenneth R. Harney's e-mail address is kharney@winstarmail.com.
