The Consumer Financial Protection Bureau, or CFPB, released a report examining the differences between credit scores sold to consumers and scores used by lenders to make credit decisions.

The Dodd-Frank Wall Street Reform and Consumer Protection Act required the CFPB to study the differences between credit scores consumers purchase and those creditors use to make credit decisions.  The CFPB’s report covers:

  • the process of developing credit scoring models,
  • why different scoring models may produce different scores for the same consumer,
  • how different scoring models are used by creditors in the marketplace,
  • what credit scores are available to consumers for purchase, and
  • ways that differences between the scores provided to creditors and those provided to consumers may disadvantage consumers.

Consumer reporting agencies, or CRAs, compile and maintain files on consumers that are used to produce credit reports. Credit scores are numerical summaries of the comparative credit risks of default; they are calculated based on information contained in credit files and credit reports. These scores are important because they are used to make credit-granting decisions, to identify prospects for credit offers and solicitations, to make decisions about raising or lowering credit limits on credit cards, and to set terms for mortgages or other loans, among other uses.

While most credit scores are purchased by lenders and other users to assess consumers’ credit risk, consumers can also purchase credit scores when they obtain their free annual credit reports, when they request copies of their credit reports directly from CRAs, or when they enroll in “credit monitoring” services that offer credit reports and scores for a monthly subscription fee. The credit scores available for purchase by consumers may vary from the score used by a lender for a variety of reasons, including:

  • Use of different scoring models;
  • Lenders and consumers may not use the same CRA;
  • Data in the consumer’s credit reports change between the time the consumer purchases a score and the time the lender obtains the score;
  • A consumer and a lender  could possibly access different reports from the CRA, if they were to use different identifying information about the consumer.

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