One in five U.S. consumers is likely to receive a credit score different than the one given to lenders, potentially closing off access to credit for millions of Americans, the Consumer Financial Protection Bureau found in a new study.
The study comes as the consumer agency, created by the Dodd-Frank law of 2010, begins supervision of credit-reporting companies' records and practices. The work involves direct examination of about 30 businesses, including the three biggest, Equifax Inc., Experian Plc and TransUnion Corp.
"This study highlights the complexities consumers face in the credit scoring market," said Richard Cordray, the agency's director. "When consumers buy a credit score, they should be aware that a lender may be using a very different score in making a credit decision."
Under the Fair Credit Reporting Act, consumers are entitled to a free copy of their credit report each year. Consumer advocates have long charged that credit-reporting companies provide varying scores to lenders, potentially driving the cost of credit higher or depriving consumers of it entirely.
Specifically, the bureau found that one in five consumers would likely receive a "meaningfully different" score than their lender, potentially resulting in harm to those consumers. At the same time, consumers are unlikely to know about the discrepancy.
"Consumers who have reviewed their own score may expect a certain price from a lender, may waste time and effort applying for loans they are not qualified for, or may accept offers that are worse than they could get," according to the study.