A new credit score is being introduced by another provider and this one is designed to use some non-traditional sources of information for creating the score. The concern is whether it will really benefit consumers.
FICO
Fair Isaac Company (FICO) has long been the dominant provider of credit scores used to determine all types of credit, from credit cards to car loans and mortgages. Credit scores typically are based on information in your credit report, such as types of credit, interest rates, amounts, payment history, delinquent payments and bankruptcy filings.
Credit scores are a created for specific lenders and you really do not have just a single score number. When you attempt to obtain a mortgage loan, that lender may see a different score than if you were applying for a car loan. This is because FICO tailors the scores for the risks that concern a particular lender.
The CoreScore
A new credit score has been developed by CoreLogic, a provider of financial information, and is called "CoreScore." It will use such unusual sources as payday loans, child support payments, rent-to-own programs, and will add items like apartment applications, eviction notices, rent payments and possibly utilities' payments.
A concern raised in a Time.com story by a consumer advocate from National Consumer Law Center is that such a report will merely contain more information, which may provide the potential lender with more reasons to make a negative assessment of the applicant.
Traditional lenders often view payday loans and other subprime financial instruments as risk factors and may be less inclined to lend to borrowers of those products.
Because many people have limited access to traditional lending, their credit report can be sparse, and they may be turned down for new credit because of the lack credit history. Lenders may see payday loans negatively, even when they are current, and the new credit score may be of little help to many low-income borrowers.
Disputing Inaccurate Information
Disputing errors has always been a problem, and CoreLogic is promising there will be a new online method for disputing errors. Because the new score will have more sources of information, it could have more potential errors.
A free copy of the report should be available from the annualcreditreport.com site next year, but it remains to be seen how easy it may be to correct a delinquent rent payment that was withheld because of problems with an apartment and landlord.
