July 27, 2009
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News: FICO Goes To Court
The Fair Isaac Company that produces the largest credit reporting model in the nation has been given the go ahead to proceed to trial against Experian and TransUnion. Experian and TransUnion are two of the three largest credit reporting bureaus in the U.S. The third, Equifax has already settled the dispute with FICO earlier this year. All three companies sell credit scores to lenders like credit card companies that use them to determine an individual's creditworthiness. The lawsuit involves the marketing of the non-FICO credit score, known as the VantageScore, which was designed by the three major credit reporting bureaus, Experian, Equifax, and TransUnion. The bureaus are marketing the VantageScore to lenders including credit card consumers with misleading information. The suit alleges that both Experian and TransUnion are knowingly marketing the VantageScore as the authentic FICO, thereby misleading consumers and credit cardholders in believing they are purchasing the FICO score.
Fair Isaac Company generates most of its earnings from selling the FICO score to lenders including credit card companies as well as the general public. In addition to their own organization's credit score, the credit reporting bureaus sell other products to consumers and credit cardholders like credit monitoring services, credit reports, and credit freezing services. The individual organization's credit score is derived from information formed by each individual company. The scores often vary from one agency to another. The FICO score, on the other hand, is calculated based on the combined information from all three credit reporting bureaus. Most lenders use the FICO in determining consumer credit risks. Fair Isaac alleges that this can be very confusing to the consumer.
The situation is sure to put a damper on the working relationships between Fair Isaac and the two credit reporting bureaus. Fair Isaac depends on information it gathers from these agencies and the lawsuit most likely will create an added strain. Meanwhile, as the copyright infringement suit proceeds, credit card customers should be cautious in accepting any offer for their credit score to assure they understand exactly what they are paying for.