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FICO Loses in Case Involving Credit Score System

By Sally Maison
Published: Thursday, November 26th, 2009

Fair Isaac Corp., the provider of the most widely used credit score system, has lost a lawsuit last Friday against other companies providing consumer rating services. But officials announced that they plan to appeal the decision. The lawsuit was first filed in Minneapolis in October 2006 for antitrust and trademark violations.

FICO Loses in Case Involving Credit Score SystemThe lawsuit was brought against VantageScore Solutions, Inc., TransUnion LLC, and Experian PLC, with FICO claiming that both companies are engaging in unfair business practices and copyright infringement. Equifax Inc. was originally included in the suit but the company managed to come up with an agreement with Fair Isaac.

Fair Isaac Corp. contends that the two companies confuse consumers by using VantageScore, a credit score system that is similar to FICO. VantageScore employs a credit score model that ranges from 501 to 990, while Fair Isaac’s system runs from 300 to 850.

Mark Greene, CEO of Fair Isaac, said the company brought the lawsuit forward because they wanted to protect consumers and avoid confusion among them. He adds that they were disappointed by the jury’s decision, but expresses confidence regarding the validity of their claims.

Meanwhile, a group president with Experian, Kerry Williams, retorts that the verdict of the jury was a victory for their company as well as the consumers. He said the jury’s decision will provide consumers with more choice regarding the credit score system to use. He further commented that the recent ruling will prevent FICO from continuing to stifle competition in the market. Fair Isaac Company, as of present, remains the most popular provider of credit score system after it was endorsed by federal government back in the 1990’s.

According to Experian and TransUnion, two of the three major credit bureaus in the United States, the ruling proves that Fair Isaac committed a misrepresentation when it registered its credit score model with the US Patent and Trademark Office.

Experian, Equifax, and TransUnion launched VantageScore, a credit rating product, in March 2006 with the aim of competing with the FICO Score initially launched by Fair Isaac in the late 1950’s. A lawsuit immediately followed the launching of VantageScore, which has heard by the United States District Court in Minneapolis.

Because of the verdict, Experian and TransUnion will be allowed to continue selling VantageScore to banks and other lenders, who use their consumer rating model to decide whether or at what costs a loan will be granted. The developers of VantageScore claim that their scoring model more accurately aligns with letter grading that ranges from A to F.

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