Spread of Credit Scoring: Consumer Boon or Bane?

If your credit score is over 800, you likely think you don’t have to worry about the growing prevalence of credit scoring. After all, you’re way ahead in this game.

You’re wrong. One late payment — say, you go on vacation and forget a bill — is enough to topple your 800 score, where you are in the top 10 percent nationally, by as much as 160 points to a below-average 640.

Maybe that wouldn’t have been a problem when credit scoring was limited to only a handful of mortgage lenders. But these days credit scores are used to judge consumers on a wide variety of transactions, not all of them obvious.

And because more companies monitor the scores, one misstep can trip up your entire financial plan since a warning sign logged by one lender can trigger changes in how much others charge you.

“A problem in one relationship with a lender can snowball into problems with many others,” said Brad Scriber, a credit-scoring expert with the Consumer Federation of America.

How pervasive is credit scoring? In addition to determining what interest rate you’ll be charged on a mortgage or auto loan, credit scores affect the chances that you will be: pitched a credit card, hired for a certain job, allowed to rent an apartment, challenged over a worker’s compensation claim, forced to pay a utility-account deposit, sold a prime cell-phone plan or given the lowest rates on homeowners and auto insurance.

“In most of the areas where credit is an integral part of the relationship between a business and a consumer, some type of scoring is taking place,” said Craig Watts, spokesman for Fair Isaac, the company that created the FICO score. The medical field may be the only exception, he said, though that may change.

The breadth of information logged is growing, too. Fair Isaac now sells to lenders its new FICO Expansion score, designed to create scores for an estimated 22 million consumers without credit information on file — those who don’t use credit cards, mortgages or other traditional forms of credit — plus another 30 million with “thin” credit files that make the rendering of a traditional FICO score impossible.

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