Credit reporting is an industry that has been long overdue for an overhaul. First the credit bureaus, Equifax, Trans Union, and Experian, have long been considered consumer-unfriendly and have recently been slapped with hefty fines by the FTC for unfair practices. Now the credit scoring company Fair Isaac Co, (FICO) is strongarming the credit bureaus not to share credit scoring information with companies who intend to pass along the data to their consumers.

That puts the squeeze on E-LOAN, which has just introduced a credit scoring component on its My E-LOAN feature that enables consumers to read their own scores, follow the scoring table, and contact the credit bureaus to ask questions or report errors. E-Loan had been getting the FICO scores from Equifax, but suddenly Equifax stopped sending scores to CreditinfoNet, E-LOAN's third-party provider of the scores. One thousand customers during a 24-hour period were not able to access the feature due to the cut-off, so E-LOAN has turned to an alternative credit bureau to continue the service.

"Credit scores are used by most mortgage lenders to determine whether potential buyers or refinancers qualify for a home loan," says Chris Larson, CEO of E-LOAN. "We passionately believe consumers have a right to own and be educated about their data."

The action temporarily disrupted E-LOAN's most popular new feature and fielded complaints from customers. Customers were hurt because they couldn't get the scores. But FICO may be more interested in how its own business may be affected. The edu-content on E-LOAN provided information on how the scores are tabulated, what they mean, and listed who to call to correct inaccuracies.

And that is apparently what FICO wanted stopped. By publishing the scores and their reason codes, E-LOAN may have made FICO vulnerable to competition where it had not been before.

According to a report in American Banker, Fannie Mae Chairman Franklin D. Raines, says FICO's system uses "ambiguous factors to calculate credit scores." Fannie Mae is now developing its own credit scoring system.

"My E-LOAN customers have shown no evidence that they are "confused" by their scores," states Larson. "In fact, over 10,000 accounts were opened in the first 30 days and now the count is almost up to 20,000. The response to the FICO offering has been overwhelmingly positive."

Published: April 6, 2000

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