February 13,2009
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News: Bureaus' Blues; Consumers Lose.
Dissention in the ranks or what? Why is Experian pulling out on FICO? Tomorrow is the day when Experian stops supporting public support of the FICO credit card standard. As one of the three pillars of credit reporting in our nation, Experian has always been regarded as a symbol of standardized order for the credit card industry. In fact, over 90 of our nations 100 largest financial institutions rely on the FICO system. Not only do the 25 largest credit card issuers use it but also, the 25 largest auto lenders use it too. But now, when a credit card consumer wants to improve their FICO Score, they can no longer turn to Experian for help.
Apparently, it all goes back to a scuffle between Experian and the Fair Isaac Corporation back in 2006. An antitrust lawsuit was filed against all three bureaus (TransUnion, Equifax and Experian) by Fair Isaac back then after they ‘mavericked' over to their own brand of credit card scoring. The new scheme they were moving over to (or at least countering with) was called "VantageScore". VantageScore uses a different scale that runs from 501 to 990 (FICO runs from 300 to 850). In addition, Experian is also coming out with its own proprietary flavor called "PLUS score". The point missed here is that credit card scoring standards are going out the window. The issue here isn't about which scoring model is better. It's about the universal standard that everyone has already embraced and is content with. Since there has been no public outcry against the FICO system, it only looks like Experian is just looking for more money for themselves.
As far as the 2006 litigation, Fair Isaac has dropped Equifax from the lawsuit, which is still ongoing for the other two bureaus. Experian contends however, that there are still hard feelings. Does this justify throwing the credit card industry into pandemonium over hard feelings with the turmoil we're already in? Approximately about 200 million American card holders are expected by this.
For the meanwhile, credit card consumers can still procure their FICO Scores for TransUnion and Equifax in the conventional way at MyFICO.com and Experian still supports the FICO standard so they don't lose most of their customers. However, card holders must now obtain Experian FICO scores from their individual card lenders. Lacking, will be the ‘Experian advice' that goes with it and there's no guarantee that lenders will cooperate. Where is Experian's loyalty to the consumer? Do our consumers need to complain to Congress again to maintain order in the credit card industry?