Singletary: A mistake by Equifax should lead to clearer disclosure of credit scores

Let's hope a huge mistake by Equifax will lead to something consumers should have access to for free — the exact credit scores lenders use to determine their creditworthiness.

Equifax, one of the three major credit bureaus, acknowledged earlier this month that between March 17 and April 6, a coding issue resulted in the possible miscalculation of information used in credit model calculations.

The credit bureau said the issue was fixed by April 6 and that credit reports were not changed as a result of this issue. Only a small number of consumers may have received a different credit decision as a result of the coding issue, the company said in a statement.

But then came this revelation.

"Our data shows that less than 300,000 consumers experienced a score shift of 25 points or more," Equifax said. "While the score may have shifted, a score shift does not necessarily mean that a consumer's credit decision was negatively impacted."

Yeah, but if some consumers' scores did shift down by 25 points during those three weeks, that could have led to a loan that was significantly more expensive or denied.

Let's say a lender uses the FICO scoring model in which credit scores range from a low of 300 to a high of 850. A credit score that would have been 700 but was erroneously reported as 675 could have landed a borrower in a pricing tier that ultimately resulted in a higher interest rate.

"For consumers who attempted to obtain credit between March 17 and April 6, 2022, and think their decision may have been impacted, Equifax advises that they reach out to the lender for more information," a spokeswoman for Equifax said in an e-mail.

If they haven't already, the Consumer Financial Protection Bureau (CFPB), which supervises the major credit bureaus, should be investigating this matter.

"We'll decline to comment on or confirm any investigation," a spokesman for the agency e-mailed.

Aside from the fact that Equifax needs to be more transparent about what steps it plans to take to assist affected consumers, this recent error is a good time to renew the call that we deserve free access to the same credit scores lenders get.

You might be thinking, "Hey, I can get a free credit score."

But what you may not realize is that when you check your credit scores, you're not necessarily receiving the same score as your lender.

Equifax explains the difference this way: "What you generally see are educational credit scores, meaning they are intended to give you a close idea of your scores for informational and monitoring purposes. While they are a good way to gauge your credit rating, you may not be seeing the exact same numbers as your lender."

There's more.

Your score can vary depending on what scoring model is used and which credit report is accessed to generate the score.

There's the credit scoring juggernaut FICO, the scoring system most used by lenders.

Wait, there's more.

In 2006, VantageScore was created by the three credit bureaus — Equifax, Experian and TransUnion — to compete with FICO. It also ranges from 300 to 850.

A high score, whether FICO or VantageScore — along with other factors lenders consider — can place you in a tier that results in the best lending deals. Even a small drop in your score can push you into a less desirable lending category, lowering the amount you can borrow and increasing the interest and fees you pay.

All these different scores create confusion for consumers. It also puts them at a disadvantage in catching a miscalculation like the one made by Equifax.

If you pull your free credit scores meant just for educational purposes and see you are usually in the 700 plus range, you might be overconfident that you're going to get a good deal. But that may not be the case if the score received by a lender is lower, pushing you into a less favorable pricing tier. You might not be inclined to question the difference after the lender points out that what they pulled was your "real" score.

If your score is excellent — in the high 700s and over 800 — small variations won't matter. However, if you're just barely hanging in a certain credit range, a lower score can have a big impact on what you pay for credit or whether you qualify at all.

It's been almost 18 years since the Fair Credit Reporting Act mandated that consumers, upon request, receive a free copy of their credit report once every 12 months through AnnualCreditReport.com. (At the start of the pandemic, the bureaus began offering free weekly online credit reports and have continued to do so.)

Just like consumers fought for free access to their credit reports, we are long overdue for the same access to the exact credit scores lenders use. The Equifax coding issue should be the push needed to make it so.