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Your free credit scores don’t tell the whole story

Equifax miscalculated credit scores for thousands of consumers. Some people may have received a different credit decision based on the coding error.

Equifax, a consumer credit reporting agency, recently had a coding issue that resulted in miscalculated credit scores. (Mike Stewart/AP)

Let’s hope a huge mistake by Equifax will lead to something consumers should have access to for free — the exact credit scores lenders use to determine their creditworthiness.

Equifax, one of the three major credit bureaus, acknowledged this past week that between March 17 and April 6, a coding issue resulted in the possible miscalculation of information used in credit model calculations.

The credit bureau said the issue was fixed by April 6 and that credit reports were not changed as a result of this issue. Only a small number of consumers may have received a different credit decision as a result of the coding issue, the company said in a statement.

But then came this revelation.

“Our data shows that less than 300,000 consumers experienced a score shift of 25 points or more,” Equifax said. “While the score may have shifted, a score shift does not necessarily mean that a consumer’s credit decision was negatively impacted.”

Yeah, but if some consumers’ scores did shift down by 25 points during those three weeks, that could have led to a loan that was significantly more expensive or denied.

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Let’s say a lender uses the FICO scoring model in which credit scores range from a low of 300 to a high of 850. A credit score that would have been 700 but was erroneously reported as 675 could have landed a borrower in a pricing tier that ultimately resulted in a higher interest rate.

“We are collaborating with our customers to determine the actual impact to consumers,” the company statement said.

“For consumers who attempted to obtain credit between March 17 and April 6, 2022, and think their decision may have been impacted, Equifax advises that they reach out to the lender for more information,” a spokeswoman for Equifax said in an email.

If they haven’t already, the Consumer Financial Protection Bureau (CFPB), which supervises the major credit bureaus, should be investigating this matter.

“We’ll decline to comment on or confirm any investigation,” a spokesman for the agency emailed.

Credit bureaus drew more than half of consumer complaints to CFPB in past two years

Aside from the fact that Equifax needs to be more transparent about what steps it plans to take to assist affected consumers, this recent error is a good time to renew the call that we deserve free access to the same credit scores lenders get.

You might be thinking, “Hey, I can get a free credit score.”

True, credit card companies, banks, credit unions, and credit monitoring services now routinely provide consumers free scores.

But what you may not realize is that when you check your credit scores, you’re not necessarily receiving the same score as your lender.

Equifax explains the difference this way: “What you generally see are educational credit scores, meaning they are intended to give you a close idea of your scores for informational and monitoring purposes. While they are a good way to gauge your credit rating, you may not be seeing the exact same numbers as your lender.”

There’s more.

Your score can vary depending on what scoring model is used and which credit report is accessed to generate the score.

There’s the credit scoring juggernaut FICO, the scoring system most used by lenders.

My adult child built a good credit score in just three months. Here’s how she did it.

But even the scores under the FICO brand can vary. FICO has updated its scoring model several times. But this does not mean that lenders use the latest versions.

Wait, there’s more.

In 2006, VantageScore was created by the three credit bureaus — Equifax, Experian, and TransUnion — to compete with FICO. It also ranges from 300 to 850.

A high score, whether FICO or VantageScore — along with other factors lenders consider — can place you in a tier that results in the best lending deals. Even a small drop in your score can push you into a less desirable lending category, lowering the amount you can borrow and increasing the interest and fees you pay.

I routinely pull my “education” credit scores. All the institutions using FICO put my credit at a perfect 850.

How I got a perfect 850 credit score

But at my credit union, I have access to two different score models. One uses FICO Score 9 based on data in my Equifax credit file. The other uses VantageScore 3.0 based on my TransUnion credit report. The VantageScore report says my score was 832 as of Aug. 1.

All these different scores create confusion for consumers. It also puts them at a disadvantage in catching a miscalculation like the one made by Equifax.

If you pull your free credit scores meant just for educational purposes and see you are usually in the 700 plus range, you might be overconfident that you’re going to get a good deal. But that may not be the case if the score received by a lender is lower, pushing you into a less favorable pricing tier. You might not be inclined to question the difference after the lender points out that what they pulled was your “real” score.

I’ve talked to consumers who pulled their free scores before applying for a loan. They thought they were in good shape, only to find out the score the lender pulled was much lower. But they were already at the car dealer and too pumped to get their new car to back out of the purchase.

The Florida-based law firm Morgan & Morgan has filed a class-action lawsuit against Equifax for allegedly providing inaccurate credit scores.

The class representative, a resident of Jacksonville, Fla., alleges she was denied an auto loan in April after the report Equifax provided to the dealership showed a credit score that was inaccurate by 130 points. As a result of the error, the borrower now pays $154 more for her car loan per month, according to the complaint filed in the U.S. District Court in the Northern District of Georgia.

“We believe that many of the people impacted — some of whom may still be unaware of what happened — suffered severe financial consequences,” according to a statement from Morgan & Morgan attorneys John Morgan and John Yanchunis.

Knowing exactly what a lender will see might give people pause. They might wait to apply for a loan until they can work on boosting their credit score.

If your score is excellent — in the high 700s and over 800 — small variations won’t matter. However, if you’re just barely hanging in a certain credit range, a lower score can have a big impact on what you pay for credit or whether you qualify at all.

Why it’s so hard to fix errors on your credit report

Consumers have the right to get the same information the lenders get so they can make the best decision about when to apply for a loan.

It’s been almost 18 years since the Fair Credit Reporting Act mandated that consumers, upon request, receive a free copy of their credit report once every 12 months through (At the start of the pandemic, the bureaus began offering free weekly online credit reports and have continued to do so.)

Just like consumers fought for free access to their credit reports, we are long overdue for the same access to the exact credit scores lenders use. The Equifax coding issue should be the push needed to make it so.

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