As reported in the BIIA Newsletter July 07-06 issue, TransUnion, Experian and Equifax worked together to develop a tri-bureau generic credit scoring system called VantageScore. While credit scoring systems exist in the market today, including several that are produced by the individual companies themselves, VantageScore marks the first time that the three companies joined forces to produce a model that scores consumers consistently across all three companies. Many people wondered as to why Fair Isaac was not invited. If the FICO score was the industry standard, what prompted three important users to create their own standard? Now Fair Isaac has filed suits against Equifax, Inc., Experian Information Solutions, Inc., TransUnion LLC—the three major credit reporting companies—and VantageScore Solutions LLC, the company that has licensed the VantageScore system to Fair Isaac’s three competitors.

Fair Isaac claims that the three credit reporting companies have used false marketing to mischaracterize Fair Isaac’s FICO scores, which have long been considered the industry standard. Equifax, Experian and TransUnion also currently control the price a lender pays to receive a FICO and a VantageScore, which Fair Isaac believes puts the three reporting agencies in an unfair position to promote the VantageScore at the cost of fair competition with the FICO score. In a statement, Fair Isaac CEO Tom Grudnowski said that his company has “competed against the credit reporting agencies’ scoring products for many years, and [is] happy to compete on a level playing field.” Grudnowski added, “The recent agreement between the three powerhouse agencies unfairly threatens our ability to compete.”

Equifax, in a press release, stated that it found Fair Isaac’s accusations to be “without merit” and that the company “plans to vigorously defend itself and VantageScore Solutions LLC.” Equifax added that the creation of VantageScore was a direct result of customer demand for “a more consistent, objective and better performing approach to credit scoring.” TransUnion made a statement expressing similar beliefs, stating that the company was “not surprised” by Fair Isaac’s use of litigation. Experian withheld comments.

 BIIA Newsletter October – 2006 Issue