Homebuyers Finally Getting To See Their Credit Scores.

WANT to know your score? Now you can have it. And better yet, you can understand it.

Individual credit scores, kept secret from homebuyers and mortgage applicants for years, are now readily available for the first time. Last week, the developer of the dominant credit-scoring system -- Fair, Isaac and Co. -- teamed online with giant credit bureau Equifax Inc. to provide FICO scores and other personal credit information to consumers nationwide.

FICO scores are what the vast majority of American mortgage lenders use to evaluate home loan applicants' creditworthiness. The scores are based on complex statistical models that analyze the electronic credit files maintained on virtually all adults in the United States and other countries.

The scores range from the 300s to about 850, with higher scores indicating lower risk. Many lenders reserve their most favorable quotes of rates and fees for applicants in the upper FICO score ranges -- 700 and above. Mortgage applicants in the low 600s and below get progressively higher rate quotes and are charged higher loan fees. FICO scores, in other words, often determine what you pay for the money you borrow.

Under longstanding contractual agreements among Fair, Isaac and the three big national credit bureaus -- Equifax, Trans Union and Experian -- FICO scores were kept secret from consumers. But mounting consumer pressure -- and legislative moves at the state and federal levels -- forced Fair, Isaac to rethink its policies last year.

California mandated disclosure of credit scores to all borrowers who request them, beginning July 1. Federal legislation that would do the same thing nationwide is pending in both houses of Congress.

This week's launch of what the two sponsoring companies call the "ScorePower" service should eliminate the dispute over FICO score secrecy. For a $12.95 charge on a major credit card, anyone can now obtain not only an Equifax credit report online, but also current FICO score, accessible for 30 days, plus personalized guidance on the key reasons for the score. The service will also provide a graphic representation showing how you stack up against all other borrowers, and recommendations on what you can do to raise your score.

Answering questions

A final feature of the service involves a tollfree number for you to speak with Equifax staff who will answer questions about your credit profile and FICO score. At least in its initial stages, the service will only be available online, at either www.equifax.com or www.myfico.com. The two firms say they have taken extraordinary steps to make the new service secure from Internet interlopers or fraud.

To access your credit data, you'll have to pass through what Equifax Vice President J. Michael Cummins calls an "interactive identity authentication process." The program will ask a series of questions involving credit file information -- consumer loan balances, names of lenders, etc. -- that only Equifax and the holder of the credit accounts could answer.

The authentication system is "sophisticated enough" to screen out someone in possession of another person's wallet, credit cards and Social Security number who is seeking illegal access to a credit file, Cummins said.

With easy access to FICO scores now a reality, how might consumers use them? Fair, Isaac's general manager, Cheri St. John, envisions development of a new level of consumer awareness of credit issues and improved management of household credit.

"What we are hoping is that this will allow people to proactively manage their credit," St. John said. With the personalized guidance available through the ScorePower service, people will know precisely how to raise their scores -- whether through paying off balances on certain credit cards or even expanding their use of credit.

Other sources

Although the new service is the first to offer the actual FICO score that lenders obtain and use in credit decisions, it is not the only online commercial source of credit scores. At least two others -- www.qspace.com and www.worthknowing.com -- offer other types of scores that analyze and quantify one's credit standing. For some consumers, the other Web sites can be confusing. For example, a Washington-area homeowner recently obtained what she assumed was her "credit score" through the QSpace Web site and was disturbed that her score was much lower than the credit score she had heard about in a financing several years earlier.

The QSpace number is not a FICO score -- a disclosure found only in the fine print on the Web site. It is instead a "generic" score that a QSpace spokesman said can only "emulate" a real FICO score.

Kenneth Harney is a columnist for The Washington Post Writers Group.

Freddie Mac Gives Break on Appraisals

The country's second-largest source of home-mortgage money has a new, money-saving proposition for homebuyers: Don't bother paying $350 to $450 for a traditional real estate appraisal. Skip it and avoid all but $50 or $200 of what you'd normally pay for a valuation of the property you're buying.

Sound intriguing? Beginning this week, Freddie Mac, the giant home-loan investor, is changing one of the oldest rules of the real estate game. On certain "low-risk" mortgages it finances, Freddie no lodger requires a formal appraisal. "Low-risk" means loans of up to $275,000 to homebuyers with good to excellent credit histories who are making a down payment of 20 percent or more.

In place of the mandatory appraisal, Freddie will perform an electronic "collateral assessment" on the home to determine its approximate market value. This estimate, in turn, will be computed by accessing online databases that the company already taps into for prices, appreciation rates, resale value changes and local market trends. Some of the data are publicly available, pulled from county courthouse records. Other information derives from actual appraisals.

The new program, which Freddie estimates could save American homebuyers $500 million in appraisal fees per year, is expected to work like this: You're moving up to a larger home and you apply to one of the thousands of mortgage companies that regularly sell loans to Freddie. If you qualify on credit and down payment, your lender may offer you this choice: You can pay either $50 or $200 to cover the costs of Freddie's electronic valuation, or an appraiser can be hired to do a full-blown valuation at a higher cost.

Kenneth Harney