Myself and other consumer advocates have strongly been arguing for free FICO scores for all consumers (akin to the free credit reports consumers now receive under the FCRA). Earlier in March, FICO announced their latest scoring model FICO9. As part of the press released they sold 10 billion scores last year. We decided to do a little bit of math to work out how much lenders are actually paying for these scores:
- FICO’s revenue last year: 737.77 million
- Scores sold: 10 billion
- Price paid per score: $0.073777, or about 7.5¢
There are a few obvious flaws with this assumption. Firstly this only accounts for the money lenders must pay FICO for the score, it’s safe to assume they also must pay the credit bureaus (TransUnion, Equifax & Experian) to access the credit reports these scores are based on – but as these bureaus are already required to give consumers their reports for free it’s safe to assume that these could be used to automatically calculate a consumers credit score as well.
It also doesn’t account for any of the revenue that FICO makes from selling scores direct to consumers, this would further reduce the cost per score. At the moment it’s hard to see why all lenders aren’t giving out free FICO scores voluntarily before they are mandated to do so. Some lenders are better than others with a few credit card issuers (Barclays, Discover, Walmart & FNBO) now giving all their card holders access to their score freely as a card benefit under the FICO open access program.
When I’ve pushed for this change with policy makers, one of the stumbling blocks has always been – which FICO score should be offered for free (there are a total of 49 if you include the different versions, industry specific scores and nextgen scores, with more being added once FICO9 is released)? The answer is pretty simple, consumers should be offered the latest version of the FICO classic score from each of the three bureaus when they pull their credit report from the government supported site annualcreditreport.com. Other credit scores with lender market share (such as Vantage Score) should also be required to provide this information. All scoring companies should also be required to disclosure further information on how these scores are calculated and basic credit education on how these scores can be improved.
It’s more a matter of when, not if this will come to fruition and whether it’ll be government mandated or the scoring companies and credit bureaus will do it voluntarily. Our hats do go off to FICO for attempting to make these scores more widespread and hope their open access program becomes a default benefit for all card holders.