Friday, January 30, 2009

It's Time For Fair Isaac and TransUnion To Modernize The FICO Score They Sell To The Public


Now that TransUnion has officially adopted Fair Isaac's FICO 08 score (see story), I have a suggestion for Fair Isaac and TransUnion: move into the 21st century on the FICO score that's provided to consumers.

For now, consumers who pull their TransUnion FICO scores through Fair Isaac's myfico.com or TransUnion's Consumer Solutions site (link here) are getting scores that are based on Fair Isaac's 1998 scoring model, or Classic 98. Not only is the score based on a model that's long in the tooth, lenders are mostly working from Fair Isaac's Classic 04 model now. As such, consumers are essentially pulling a score that is -- putting it mildly -- fairly useless.

Indeed, as of right now I consider the TransUnion FICO consumer score about as useful as any number of scores that I often -- and derisively -- refer to as FAKO. Indeed, it's about as useful as the scores that TransUnion peddles with its TrueCredit credit monitoring product. And you know how useless those scores are (see story here).

Given how outdated the consumer version of the TransUnion FICO score is, and given the fact that creditors have been using Classic 04 to make lending decisions for some time, I've been wondering why TransUnion and myFICO haven't pushed for a transition to Classic 04. "myFICO and TransUnion do plan to tap the '04 model for scores provided to consumers, and for the reason you indicated," Barry Paperno, consumer operations manager for Fair Isaac, told me. "We expect that transition to take place soon." I don't know how fast "soon" is, but it can't come soon enough. It's silly for consumers to rely on a model that most lenders aren't using.

In the meantime, until Fair Isaac and TransUnion update the consumer version of the score they sell to the public ("soon"), I will admonish my readers to refrain from pulling their TransUnion FICO scores. After all, a score that's based on a 10-year-old scoring model isn't exactly helpful for my readers. Worse, the score, which myFICO sells to the public for $15.95 a pop, isn't relevant when you consider that most lenders aren't even working from that model any longer.

Perhaps the TransUnion FICO score that's sold to the consumer should come with a warning label: "This score may vary widely from the score that lenders use. As such, this score should be used for educational purposes only." I'm certain that consumers won't see that message anywhere on TransUnion's or myFICO's site but they're getting it here.

Until further notice, of course.

Related Articles:

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    During the Credit Crunch, Work That FICO Score
  • 36 comments:

    1. About time someone speaks the truth. Now of course will they listen?

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    2. We've been asking for it over at MyFICO.com for a while now.

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    3. This is a long overdue update-
      Thank you for sharing.

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    4. Athens, I don't hang out over at myFico.com so I didn't know that. You'd think that we'd be using Classic 04 by now.

      Athens, what have you heard? What reason is tossed around in response to the stuff that is written over there?

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    5. Tim, thanks. Hopefully the change will happen "soon."

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    6. Anon, will they listen? No idea. From what Athens is saying, I'm not the first person to bring this up. Myfico has been hearing about this. But they still haven't transitioned over yet.

      We'll see.

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    7. Hey Marcus,

      I've been reading, but haven't commented in a while. Do you think its wise for folks to cancel ScoreWatch and other FICO products they may have recently purchased (using the 50% discount made available through this site)? Thanks, Jon

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    8. My story today doesn't have anything to do with the Scorewatch product. Scorewatch uses Equifax -- not TransUnion.

      I recently bought the quarterly monitoring from TransUnion. I'll keep it -- but for educational purposes only. Ha!

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    9. Oops, guess I got too nervous, without carefully reading, lol. Thanks. Wonder, although, if Suzie Orman knew this. If she did, shame on her!

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    10. I wouldn't call this a crime, Jon. Bottom line is that it just makes the score a lot less relevant. And, if no one else is using that model to make lending decisions, then this Classic 98 has as much importance as any other score that no one uses for lending purposes.

      People knew about this. I just don't think the general public knows about it. Credit geeks know about it (though I only recently learned about it, which means I might not be a geek).

      Not sure what Orman knows.

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    11. It seems to me that some lawyer would be salivating over this. Fair Isaac spends a lot of time and effort to convince the public that their product is the only *real* credit score and if you want to see the number the lenders see, then the only place you can get it is from Fair Isaac.

      But - turns out the number they sell to you and me isn't the same number that they sell to the people who make lending decisions.

      To me, this is deceptive. Can anybody anywhere make an argument that it's not deceptive?

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    12. I cannot make an argument that it's not deceptive.

      I'd bet that before today, many of my readers thought they were getting the most relevant score through myfico and TransUnion. That they are not is likely a surprise to them.

      It was always my impression that we were getting scores that most approximated what lenders were seeing. Clearly, lenders have access to plenty of products -- variations -- but those variations are based on Classic 04 -- not Classic 98.

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    13. Oh, you can trust me on this, Marcus: You're a geek.

      Actually, you're a wonk rather than a geek. From http://dictionary.com --

      3. a person who studies a subject or issue in an excessively assiduous and thorough manner: a policy wonk.

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    14. Spooky, sweet. I'm a wonk. Love it.

      Thanks for the giggle.

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    15. I have always considered MyFICO and FAKO scores equally irrelevant, since neither is the score any lender will actually use (except in VERY rare circumstances, like Macy's/Bloomie's, which use the EX FAKO). I hate those misleading commercials that say you'll "see the score the lenders see."

      I'll never pay for a credit score, and I'll never pay attention to any score I can see. The only scores I care about are the ones I CAN'T see... now that PFICO is kaput, our only remaining access to a real score (albeit an outdated one) is gone.

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    16. We need a class action law suit against TU so they would reimburse everyone who didn't get an updated score based on updated models.

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    17. Ulysses, I think that most people think like you. They know that the FICO score we get from myfico is a close approximation of the scores that lenders use. I think it's reasonable, too, that consumers would expect the scores to be based -- at least -- on the same model (classic 04).

      I recently had a dealership pull my FICO score (Auto Industry Option FICO). That's a score that I can rely on -- since the lender itself relied on it. I won't be getting that Sears card that gives us access to PFICO, so I will also be without a score that I know a lender is using.

      In the end, FICO scores that we get from the bureaus or myFICO are close approximations of the scores that lenders use. They're not spot on, but they're close enough. I would argue that the score we get TU, however, is just too attenuated; it's not a good approximation.

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    18. Hk, I wouldn't be surprised if an attorney takes a look at this situation. Would not surprise me at all.

      Does anyone have any marketing language handy that Fair Isaac and TransUnion use?

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    19. Just out of curiosity, was our WaMu-provided PFICO score based on an enhanced version of FICO '04 or Classic '98? I would expect it to be '04 based, but thought you might know and clarify, CM. I don't recall reading that info anywhere on the web.

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    20. TangMeister, it just so happens that I do know the answer: PFICO was based on Classic 04.

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    21. Thanks, CM. I thought so, but it's good to receive a definitive answer.

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    22. Any idea which ones My FICO use for equifax and experian and if the one directly from equifax is any different?

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    23. ANON-
      The EQ scores from myFICO are the same as the FICO scores from EQ.
      As they both use the same version BEACON 5.0

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    24. I vote for a strike against getting Transunion scores from MyFico until such time as those scores become meaningful. And, if you're so inclined, letting Fair, Isaac know why. Perhaps the loss of immediate $ trumps some kind of vague talk/threat of a class-action suit.

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    25. I have told Fair Isaac what I think of the situation. And I have advised my readers to not pull TU FICO scores. But I am just a small corner somewhere on the Internet. Most people don't read this blog. Unless more people know about the situation, it will be business as usual.

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    26. What is Beacon 5.0? Is this the same as a lender would see if he pulled my Equifax score?

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    27. Beacon 5.0 is the Fair Isaac scoring model that is tied to Equifax. Most lenders use Beacon 5.0. The consumer scores that we get from myFICO are based on Beacon 5.0.

      Here is how Fair Issac described Beacon 5.0 (before the scoring model was released in 2003):

      The latest redevelopment of the BEACON® risk score will be generally available in early May 2003. BEACON 5.0 offers more refined risk prediction and is more consumer friendly due to improved inquiry logic — including lengthening the deduplication window; bypassing non-telephone utility inquiries; and treating auto and mortgage inquiries separately from other inquiries to avoid rate-shopping penalization. BEACON 5.0 is compliant with CA SB1607 and will always return at least one reason code for scores that are less than maximum.

      http://www.fairisaac.com/NR/exeres/91D267BE-5AB2-4CBD-9893-A23EC8A2686E,frameless.htm

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    28. Just came across this article. I still occasionally read myfico, tho' not like I used to, but I've NEVER seen any post urging FI to update the available TU version on myfico.

      So, yet another thanks for speaking up, and shedding the light on this, CM! ::applause:: !

      Btw, tangentially related, FI will not get a dime from me while they also allow EX to license their version of the algorithm to businesses as EX refuses to allow it for consumers. There are two parties at fault in their spat (even as FI feigns victimization... and collects the $ from allowing EX ficos to businesses).

      Thanks again, CM!

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    29. Anon, you are welcome. And I understand and appreciate that comment about EX/FICO.

      By the way, not sure if you caught it: Fair Isaac changed its corporate name today. It is now known as FICO. FI is keeping the FI name for legal purposes, though.

      Fair Isaac is Now FICO

      http://tinyurl.com/dkefum

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    30. :))) I did see that name change this am.

      Altho' FI/FICO is really "FIC" to my (admittedly very imperfect) mind; it's my business, but why I can remember many thousands of ticker symbols, the details many many 10Qs and 10Ks, historical pricing, but have no real clue what I did last Tuesday, is beyond me!! :)))

      OT: how do I put some name in place of "anon" without attaching it to a 'google acct' or 'name/url' or 'aim'. Is that still possible to do?

      TIA.

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    31. All you have to do is use the "Name/URL" option. Use your first name (or whatever) and do not include a URL at all.

      That will do the trick.

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    32. Well, 15 months after Barry Paperno said we'd get the 2004 TU FICO score model on myfico "soon"....we're still waiting. Absolutely ridiculous. :(

      We need you back to rally the troops, CM!

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    33. Myfico.com scores are a joke. I was applying for a mortgage and I wanted to check my scores so I went to myfico.com. They said my TU score was 650. Well when the lender pulled my score it was only a 590. I called myfico and they could not explain the difference.

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    34. March 2011-still no change at fico

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    35. April 2011---again still no change at fico

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