That $20 FICO Credit Score Isn’t Just Expensive — It May Be Useless

Photo (cc) by Images_of_Money

The sales pitch on Fair Isaac’s myFICO website is simple enough:

The FICO® Score is a number that summarizes your credit risk. Lenders use it to make credit decisions, such as the interest rate you get when you apply for a loan.

Being able to see what potential lenders see: That’s why so many Americans are willing to pony up $19.95 to see their credit score. And if you want to see it from each of the big three credit reporting agencies, you’ll pay three times, shelling out nearly $60.

When it comes to credit, the stakes are high. According to FICO, a low score — say, 620 — means paying 5.7 percent on a 30-year mortgage loan. A great score — say, 760 or higher — could qualify you for a much lower rate of 4.1 percent. Borrow $200,000, and over the life of the loan, the lower interest rate will save $52,000 in interest — enough to put your kids through college.

So paying to see your credit score seems like money well spent. Until, that is, you discover you’re paying for a false sense of security, because the score you’re buying may not resemble the one potential lenders see.

Watch the following short video by Money Talks News founder Stacy Johnson, then read on for more.

How FICO scores work

FICO uses a proprietary formula to calculate your three-digit credit score, which ranges from 300 to a perfect 850. It will tell you the basics of how your credit score is determined (you can read about it here) but in the end it’s kind of like the original KFC recipe: You can figure out the basic ingredients, but you couldn’t duplicate it yourself.

FICO isn’t just selling credit scores to consumers. It’s also marketing them to lenders. But when your potential lender buys a FICO score, the lender has a lot of industry-specific scores to choose from. For example, there are scores customized for mortgage lenders, car dealers, credit card issuers and many others.

According to Consumer Reports, FICO serves up 49 different scores to lenders, but only two to consumers. So when you apply for a loan, it’s likely your lender will be looking at a score that’s different from the one you buy.

In short, you might be paying for original recipe and your lender might be ordering extra crispy.

Why you should be mad

The Consumer Financial Protection Bureau studied 200,000 credit files from each of the three major credit reporting agencies. One finding: In 19 percent to 24 percent of cases, consumer scores differed from lender scores sufficiently to land the consumer in an entirely different credit category.

Result? You could think you’re in the highest category, only to find you’re not. And as we pointed out above, a lower score could cost you thousands in extra interest, especially on large loans.

We contacted FICO to ask how a consumer could rely on a FICO score, given the government findings. Here’s part of their response:

It’s true that there are multiple versions of the FICO Score, including versions for different types of credit products such as mortgages, credit cards and auto loans. But these versions are all based on the same underlying mathematical blueprint as the score sold to consumers on

So while a person’s FICO Score can vary depending on which version the lender is using to make a decision, it’s by far the most reliable and accurate depiction of a person’s credit health they can find anywhere, and is the best way to help gauge how lenders will view a consumer’s creditworthiness.

That’s not the entire response, but nothing they provided acknowledged the problem: People are being sold FICO credit scores under the assumption they’re identical to those being used by lenders, and they’re not. Furthermore, FICO knows this and isn’t disclosing it.

This is why many consumer advocates, including Money Talks News and Consumer Reports, are calling for changes. Here’s what Consumer Reports said in a recent article called “Don’t Buy Useless Credit Scores“:

We see no point in buying any consumer credit scores, given that they’re not the same ones used by lenders. But if you do, and a lender or insurer later tells you your real score is lower or higher, do what you’d do with any product that doesn’t deliver: Demand a refund.

Consumer advocates aren’t the only ones complaining. So are lawmakers. The Fair Access to Credit Scores Act of 2013 is a bill now in Congress that would amend the Fair Credit Reporting Act to allow consumers a free, accurate credit score once a year, along with their free annual credit report from

Right now, federal law requires that you can see the actual credit score a lender sees and not be charged:

  • If you were turned down for credit.
  • If you got a higher interest rate on a loan because of your score.
  • If you received unfavorable terms on a credit card.

Here’s what the proposed law would do, according to a press release from the bill’s sponsors:

This bill would expand upon that provision to provide all consumers with an annual credit score to complement their free annual credit report.

Also, this measure would ensure that the free annual credit score received by consumers is a reliable score actually used by lenders, rather than an “informational score” of unknown reliability. It would give consumers access to all scores generated in the previous year and stored in their credit files – information that lenders have accessed about the consumer’s individual creditworthiness – instead of consumers seeing only those scores that resulted in “adverse actions,” as provided by current law.

What you can do

In addition to contacting your elected representatives, there are ways you can fight back:

  • Avoid buying scores, and don’t rely too heavily on those you pay for.
  • As Consumer Reports suggests, demand a refund if the score you bought varies widely from the one your lender uses.
  • Before you agree to a loan or insurance rate, ask to see the score the lender used.
  • Check your credit in other ways, like the free annual credit reports you can get at Get a picture of your credit throughout the year by choosing a different credit bureau report every four months.
  • Support the Fair Access to Credit Scores Act of 2013 by clicking here to sign a petition.

Do you think we should get free, accurate credit scores? How do you feel about paying for a score that may not be reliable? Sound off on our Facebook page.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
Why Half of Retirees Now Owe Taxes on Social Security

Growing numbers of seniors are paying taxes on their Social Security benefits, but you might be able to avoid this fate.

7 Mistakes Guaranteed to Ruin Your Retirement

Make even one of these money mistakes, and you’ll probably end up eating ramen noodles in your golden years.

7 Surprising Features That Boost Your Home Value

You can add value to your home without hiring a contractor to do expensive renovations.

7 Free Tools for Saving More Money at Amazon

Use these websites and other tools to save money — or earn extra cash — when shopping at Amazon.

What Is Umbrella Insurance, and Do I Need It?

Umbrella insurance picks up where car and homeowners insurance leaves off. Do you need it? Here’s how to know.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

11 Senior Discounts for Anyone Age 55 or Older

There is no need to wait until you’re 65 to take advantage of so-called “senior” discounts.

11 Household Items That Go Bad — or Become Dangerous

When you get the impulse to stockpile these everyday items, pay close attention to their expiration dates.

8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

14 Things That Are ‘Free’ With Medicare

These services could save you money and help prevent costly health problems.

5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

10 Things You Should Never Do With Bleach

Does the pandemic have you reaching for bleach more than ever before? Learn the ins and outs of using this powerful disinfectant.

15 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.