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Consumers Accept Multiple Credit Scoring Models. Why Shouldn’t We?

Gene Volchek
Blog Post03/30/2018
Consumers Accept Multiple Credit Scoring Models. Why Shouldn’t We?

The concept of consumer credit engagement and literacy as beneficial to both businesses and their customers is a generally accepted paradigm - one that has evolved dramatically in recent years.

Access and score choice have driven an explosion of 21st Century consumer financial empowerment. The availability of scores from a variety of sources including direct financial institution relationships, freemium sites and credit bureau engagement has had a tremendous impact upon the credit landscape. This includes growing consumer awareness around credit scores, and the increased availability of resulting financial benefits.

Anecdotal evidence suggests that the golden rule of good financial behavior - paying bills on time – is reinforced by the insights offered through regular credit score and reporting education.

In general, credit-engaged consumers tend to enjoy:
- Increased borrowing limits
- More attractive financing rates
- Personalized offers with more beneficial terms
- Increased negotiating power
- Higher personal savings rates
- Employment flexibility 

Although there have been claims made to the contrary, there is no one universally adopted credit score. In 2016 Los Angeles Times writer Liz Weston published a column entitled Your One True Credit Score Doesn't Exist: There Are Several. She leveraged a handy technical adoption analogy to explain the proliferation of models:

“There are…different generations of each type of score, much like the different operating systems for your computer.Some lenders quickly upgrade to the latest version, just as some computer users upgraded to Windows 10 when it came out.”

- Only 4% of U.S. consumers who have been scored by more than one credit scoring model viewed having multiple scores negatively.
- Over 55% characterized the trend as positive.

In gauging their own creditworthiness, the use of multiple scoring models by consumers is resulting in increased engagement and financial opportunity, particularly among those consumers unscorable under certain models. The Annual Credit Score Knowledge Survey, initiated in 2011 by Consumer Federation of America and VantageScore LLC® shows a growing trend of consumer credit awareness over a six-year period. The 2016 edition revealed that a large majority of consumers, 80%, now know the basic facts about credit scores. This compares with 60% in 2011.

The claim that consumers are disadvantaged by multiple scoring models is a myth perpetuated by certain entities for arguably anti-competitive reasons. The reality does not support those arguments. Access and transparency, rather than circumscribed monopoly, offer consumers the greatest opportunity for financial success.

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