FICO, a company that develops the FICO Score, "the standard measure of consumer credit risk in the United States" has announced a new program, the "Open Access for Credit and Financial Counseling" which will allow credit and housing counselors to give their clients' their individual credit score for free. These credit and housing counselors currently buy the client's credit report/score from the credit reporting agencies (CRA) and under their agreements with the CRA have been allowed to use the information to counsel their clients on how to improve their credit, but not to give the client the actual score. Since most lenders use some version of a credit score to determine the terms of any loan and since credit scores from the CRA's are not free to consumers, this is a step in the right direction.
However, I am concerned about what data is used to credit these scores. Many types of businesses do not report to the CRAs resulting in many individuals having difficulty in generating a credit score healthy enough to get a loan, or favorable terms with one. According to a recent Washington Post Article, "A new kind of credit score for those with no credit", FICO is developing a new score to help people who have had difficulty in the past in having enough data to create a score. Information from utility companies will be added to this new score. That seems fair and helpful. Information on an individual's property and how long they have lived at this address, or how often they have moved around, will also be included. The argument is that the longer a person has lived at one address shows signs of stability. I disagree and think this will harm the credit score for young adults and the low-moderate income individuals. Data collected on how we handle credit and payments on our obligations makes sense to be the data used to assess risk for future loans. How often I move does not.
