Credit Score Industry Infighting: Greed Exposed
If you are like most U.S. consumers, you have been brought up (or forced to participate) in a consumer credit system in which we are taught to worship at the altar of the almighty credit score. This causes many of us to focus on the wrong parts of our financial life while overlooking little things like true wealth building.
The FICO oligopoly has gotten into the heads of millions of Americans. Part of this is out of necessity because the credit score slime has slowly but surely oozed out of where it began. The score has become more than just a measure of your credit-worthiness. All kinds of businesses use it as metric of your worthiness as a person in general. Insurance companies, landlords, prospective employers, you name it. It’s disturbing if you really think about it. (Please take time to really think about it.)
You may be wondering about my use of the phrase “credit score oligopoly.” My assessment of the credit score industry is that it is dominated by four players, operating in a top down, push down system. Those players are the inaptly named “Fair” Isaac Corporation (FICO), Experian, Equifax and Transunion. FICO is (or at least has been) at the very top, telling everyone how our personal worthiness is to be condensed into a three digit number, the FICO score. Experian, Equifax, and Transunion are credit reporting bureaus that use the FICO scoring system to arrive at their own credit scores, based on data they have about you in their systems. They then sell access to those scores to millions of businesses who want to make all sorts of decisions and judgments about us based on our permanent records.
As a measure of the dominance of this system, I have read that at least 90% of the largest financial institutions use FICO scores, along with the 25 largest credit card issuers. It’s like the SAT and ACT combined only it never leaves our resume.
Oh, the oligopolists also sell score access to us. Some years ago the government (finally) sort of forced the three credit bureaus to make credit histories (our permanent records) available to us. That did not include, however, the actual scores. So the FICO machine took that ball and ran with it, setting up all kinds of credit score monitoring services that we can subscribe to, for a price. The FICO oligopoly created the need, got us addicted, and now is making us pay for our addiction.
With all of this credit score revenue at stake, I was not surprised to learn last week that two members of the FICO oligopoly are fighting with each other. To me, it’s like two vultures fighting over a piece of road kill. Experian has pulled out of a six year agreement with FICO whereby FICO was allowed to re-sell Experian’s version of your credit score through the myFICO profit center. This action by Experian is no doubt related to a pending lawsuit among FICO, Experian, and Transunion in which they are waging a war over the enormous stream of credit score revenues. (Equifax settled out of the case.) Isn’t it heartwarming to have these nice companies fighting over us and our permanent records? Boy, wouldn’t I love to be on the jury in FICO vs. EXPERIAN.
What should we take away from learning about this credit score industry infighting? On the practical side, it means that it will be harder – and perhaps impossible – for consumers to directly access the Experian version of their FICO score. (Experian has other scores it will gladly sell.) On the philosophical side, it further confirms how the credit scoring industry is all about profit and greed, mostly generated at our expense.
Whenever I complain about our fixation on credit scores, I am reminded by readers and other bloggers that this is the system we are in and we must play along or suffer the consequences. I get that. All I am asking is that when we get the chance to push back, we do it. Let’s force a change in a system that has gone far beyond its reasonable boundaries. We could ask landlords, employers, and others to judge us on us, not on some number that has proven itself to be a moving target.
Will you join my campaign against credit score obsession?
Image credit: Shaun W/Shuttermom