Equifax, TransUnion Busted for Credit Score Scam! Are You Owed a Refund?

I’ve been warning people not to buy their credit scores from the credit bureaus, because those scores are not their real scores; that is, they are not the scores used by mortgage lenders. Now the Consumer Finance Protection Bureau (CFPB) has levied a big fine against Equifax and TransUnion for deceiving consumers by selling those scores.

People purchased them in good faith, wanting to know if they qualified to buy a home. But the scores they got were calculated with a different, more generous algorithm, often 20 to 80 points higher than their actual mortgage scores.

Their little scam will cost those two credit bureaus more than $17,600,000. Of that, approximately $13.9 million is to go as restitution to affected consumers. The companies are required to send notification letters to the folks who were taken advantage of. I hope people don’t mistake the letters for junk mail and toss them in the recycle bin.

Going forward, Equifax and TransUnion must make it clear that the scores are good for entertainment purposes only–just kidding. Those scores are good for qualifying for a little plastic credit card, which is not that hard to do. Personally, I would not pay money for that when there are sites that offer free scores for people who want to get an “approximate score.” (Beware that the free scores are not offered as a charity. Those sites will then try their darndest to get you to buy a service or product from them, and they will send you solicitation emails until you get so sick of them that you unsubscribe.)

The third major credit bureau, Experian, was not a part of this action.

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Should You Buy Your Credit Scores?

scorechartExperian, one of the three major credit bureaus, has announced they are now selling FICO scores. (FICO stands for Fair Isaac Company, the originator of the proprietary scoring system used by mortgage lenders and other creditors.) Before you race over to their site, there is an important piece of information you need to know.

The three credit scores for sale are using their brand new algorithm called FICO 08. It has some improvements over the old system, such as medical collections are not counted against you since a majority of those are the fault of insurance companies and not the consumer. The problem is that only about 10 percent of mortgage lenders have upgraded to FICO 08.

This means that the scores you buy are likely to be different than the scores your loan officer at the bank, broker, or credit union will get when they pull your credit.

Is it then worth Experian’s fee of $50 (minus a few pennies) to get your scores? That is a personal judgment call; but for me, I would wait and let my loan officer pull the credit report that they will actually be using instead.

If you want the inside information on how certified credit specialists and credit repair attorneys get negative accounts removed from credit files and boost their clients’ credit scores, then you’ll want to check out the newly released book, Repair Your Credit Like the Pros here. With this information, you can do the work yourself and save your money for your down payment.