Should You Purchase
Credit-Score Services?

Nov. 26, 2002 -- Companies that sell credit information to lenders are stepping up efforts to convince consumers to buy their products.

Fair, Issac & Co., which writes many secret formulas used to turn credit reports into credit scores, has sold consumer credit scores since last year. On Nov. 22, it launched a $69.95 credit-monitoring service; it also will begin selling its scores in a $39.95 package that includes credit reports from all three major credit bureaus.

Experian, which compiles credit reports, next year will begin providing consumers with their scores on a monthly basis, so they can monitor changes. Experian will also unveil an "optimizer" that will tell consumers the specific ways they can boost their credit standing. Experian has yet to set a price for these services.

Credit scores -- three-digit numbers derived from the financial data in a person's credit report -- are used as a measure of credit-worthiness. Lenders rely on credit scores to determine who gets a low-interest credit card or the best mortgage rate. And insurers use a version of credit scores -- based on the same credit reports, but using different formulas -- to determine what consumers pay for auto and homeowners' policies and, in some cases, to decide who gets coverage.

This fall, Equifax Inc., a credit-reporting company, and ChoicePoint Inc., a writer of scoring formulas, began selling consumers' insurance scores. Equifax also sells credit reports and credit scores. It has begun selling a package that includes three credit reports and a Fair Issac credit score for $39.95.

TransUnion, another credit-reporting company, said this week it would sell credit reports in combination with credit scores produced by Fair Isaac for $12.95, or in a $38.85 package that lets consumers get this data four times in a year.

But is it worth buying your credit scores? Even firms that sell credit data admit that many consumers don't need to constantly monitor their credit-worthiness. Checking your credit "once a year is generally sufficient" unless you are planning for a major purchase or are concerned about identify theft, says Michelle Blechman, director of TransUnion's consumer subsidiary. Ms. Blechman advises consumers to focus not on their scores, but on the credit reports the scores are derived from.

Under the Fair Credit Reporting Act, consumers can get a free copy of their credit report if they are denied credit. Six states -- Colorado, Georgia, Maryland, Massachusetts, New Jersey and Vermont -- make free credit reports available to their residents. These laws don't extend to credit scores.

And critics say that consumers don't need costly services to improve their credit standing. "The best way to up your credit score is to pay down your credit-card balances," says Ed Mierzwinski, a consumer advocate at the U.S. Public Interest Research Group in Washington.

The companies that sell this data disagree. Having their credit information "empowers" consumers and helps them understand what goes into a lender's decision when it comes to setting rates or giving out loans, says Virgil Gardaya, a corporate vice president with Equifax. Paying down outstanding balances is just one of many factors that can affect a consumer's credit score, he adds.

For years, the industry refused to sell scores to consumers, saying they would be misconstrued. Faced with pressure from legislators and consumer groups, Fair Isaac began selling scores to consumers last year.

Nationwide, consumer sales of credit scores, credit reports and related products should total roughly $600 million this year and could easily reach $1 billion by 2005, according to Brad Eichler, an analyst with investment firm Stephens Inc.

The credit-information companies hope to tap into anxieties of people like David Fitzgerald, chief executive of an Atlanta ad agency. He frets that somebody could swipe his financial identify and ruin his credit. "I buy car insurance for my car and fire insurance for my house, but I could lose them all because of identity theft," says Mr. Fitzgerald, who subscribed to a credit-monitoring service last year for $69.95 a year. The service has never found a problem, but he says it gives him peace of mind.

Email your comments to rjeditor@dowjones.com.