The “New” Credit Score: CoreScore

Think your old credit score was bad?

Well, now there’s a new kind of credit score taking center stage…and setting the stage for financial institutions to make even more money off of the poorest Americans.

According to The Huffington Post, “The new CoreScore looks at financial records such as credit card borrowing, bank transactions and mortgage information, much like a traditional FICO credit score. The new rating also examines the kinds of transactions likely to occur at the lower end of the income scale. These include car and rental payments and payday loans. The CoreScore even examines the record for missed child support payments. If something can be financed, it seems, it can be linked to this new credit score.”

This could be bad news for those hardest hit by the current economic climate as the use of a wider range of nontraditional financial information in the CoreScore may prompt banks and other lenders to charge even higher rates for down-and-out borrowers. And in the end, these same lenders could care less about charging more for even inaccurate or out-of-date information on loans for everything from mortgage bills to car loans.

“CoreScore supplements traditional credit reports from the three major credit reporting companies, the company said. Lenders of all stripes, including for mortgages, cars and credit cards can buy the new reports, which are scheduled to debut publicly in March. Currently one mortgage lender, which CoreLogic would not name, is using the CoreScore for its credit evaluations and several top lenders, including major banks, are planning to test the score soon,” reported HuffPost. “At least 100 million Americans will have a new CoreScore report, says CoreLogic, and that includes both people who have traditional credit scores, as well as those who have no prior credit history with TransUnion, Equifax or Experian. At least 200 million people have traditional reports, used to create a FICO score that lenders consult when deciding to approve a loan application or new financial account. Employers even use credit scores to evaluate job applicants.”

CoreScore’s broad-based criteria may also impact non-traditional borrowers. For Americans who essentially “live off the credit grid,” either using cash or borrowing through informal channels, the new CoreScore could be a tough sell as well. Those folks getting a “new score” are likely to have a lower score under this nontraditional reporting scheme, giving them even less economic room to begin their history, even if they’ve been “good consumers” under traditional debt standards.

As HuffPost reported, “Falling wages, a dismal housing market and high unemployment have sent more Americans to the margins of borrowing in recent years. The problems is especially acute in American suburbs, where poverty is spreading. Meanwhile, alternative consumer financial tools have seen tremendous growth. For example, online payday lenders -- high-interest short-term loans accessible only through the Internet -- experienced 35 percent growth in revenue in 2010, according to a market report from Core Innovation Capital and Center for Financial Services Innovation, a think tank focused on financial service innovation for consumers who use banks minimally or not at all.”

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