FICO, owner of the credit-scoring formula most widely used by U.S. lenders, is giving some consumers access to their credit scores for free, even before they apply for a loan.
The offering starts today for credit-card holders of two companies: Barclaycard US, a unit of London-based Barclays Plc, and First Bankcard of Omaha, Nebraska-based First National Bank of Omaha, FICO said in a statement. San Jose, California-based FICO, formerly known as Fair Isaac Corp., is talking to other banks about giving the scores for free, said Anthony Sprauve, the firm’s senior consumer credit specialist.
“This is just the beginning,” Sprauve said in an interview. “In 2012 we sold 10 billion FICO scores to lenders and we’re prepared to make all of those scores available to consumers.”
FICO scores, which are used in lending decisions such as applications for credit cards and interest rates on home loans, range from 300 to 850. Consumer advocacy groups and lawmakers including U.S. Senator Bernie Sanders, a Vermont independent, have pushed for more access to credit information, Chi Chi Wu, a staff attorney at the National Consumer Law Center in Boston, said an interview before today’s announcement.
“Consumers should have the right to get their credit score for free before they apply for credit,” Wu said.
Many Americans “may not be fully aware of the significance of their credit score or know what they can do to correct serious errors,” Sanders said in a statement in March as he introduced legislation on the topic.
Previously, consumers who wanted to see their scores typically had to buy them through FICO’s website for $19.95 or sign up for a free trial subscription to its monthly score-monitoring service, unless they were denied credit or received less money than they sought in a loan application.
Credit scores differ from credit reports, which are provided by Equifax Inc., Experian Plc and TransUnion Corp. The three agencies are required to give consumers a free copy of their credit report upon request once every 12 months. They also can sell people a credit score, which may be an “educational score” that differs from the one used by lenders, Wu said.
FICO isn’t paying the banks or receiving compensation from them for the free-score offering, Sprauve said. Banks purchase FICO’s algorithm and data from the three credit-reporting agencies used to generate credit scores, he said.
“Having people aware of their current credit score is important to financial health,” Paul Wilmore, managing director of consumer markets at Barclaycard US, said in an interview. Its customers will be able to go online to see their FICO scores and sign up for free alerts whenever they change.
The majority of Barclaycards don’t have an annual fee, Wilmore said. The company is giving free FICO scores to customers of its Barclaycard-branded cards and those with Frontier Airlines and Carnival Cruise Lines. It will add other partner programs in 2014.
First Bankcard, a provider of co-branded credit cards, serves more than 400 financial firms and partners.