Archives for July 2014

Financial Literacy Cartoon for Kids Starring Warren Buffett

smcSecret Millionaires Club (SMC) is an animated series about a group of kids learning how to make good financial decisions and solve business problems. Episodes are available online for free. Their mentor is none other than Warren Buffett! Here’s part of a Reuters interview with Buffett regarding his involvement.

Q. How do financial literacy and entrepreneurship fit together?

A. Not everybody’s going to be an entrepreneur, but everybody should be financially literate. Financial literacy is a base requirement like spelling or reading or something of the sort that everybody should acquire at any early age. The financial habits you develop when you are young are going to go with you into your adulthood. But you can’t be an entrepreneur unless you’re financially literate.

They also run the annual Grow Your Own Business Challenge (GYOB), a nationwide contest for entrepreneurial kids aged 7 to 14. This year’s finalists included an intergenerational online community, a custom bow tie business, a worm composting kit, and a community garden that also helps feed hungry children. You can watch their pitch videos on YouTube.

After watching a few episodes, they are actually pretty good. The concepts are short (~5 minutes long) and digestible. Here’s the first one:

 
Starting a tiny business may be the funnest and thus most effective way to teach kids about money. As a parent, I’d much rather do that than give them an allowance and then force them to “save” a certain percentage. (Is it really saving if it’s not optional? Sounds more like a tax.)

T-Mobile New Plan: 4 Lines for $100/Month Unlimited Talk, Text, 10 GB of 4G LTE Data

tmobile10gig

T-Mobile just announced 7/30 that their Family Plan will offer 4 lines for $100 a month with unlimited talk, unlimited text, and 2.5 GB of 4G LTE data per line. (10 GB total across 4 lines. Unlimited 2.5G data after your LTE data allotment is used up.) That is an increase of 6 GB (1.5 GB per line) from their previous offer. Offer expires 9/30/14. I’m not sure why, but the bump up lasts only until 2016, after which it will revert back to 1GB of high speed data per line. That is 17 months from now, so hopefully 4G data will have become cheaper by then anyway. Add a 5th line for only $10 more a month.

These plans include T-Mobile’s free international 2G data and texting in 120+ countries. Came in handy for my brother-in-law when he was at the World Cup in Brazil.

These plans do not include any subsidy for a new phone. You can bring your AT&T or Verizon iPhone 5 straight over to T-Mobile just by swapping out the SIM card inside, no special unlocking procedure required. Usually the Prepaid SIM card is $10 but from 8/1 to 8/6 use the promo code SIMDEAL to get it for only a penny ($0.01). Get a nano SIM card if you have a compatible iPhone 5 or iPad Mini. Get a micro SIM card if you have a compatible iPhone 4, 4S or iPad. You can also check compatibility here.

I really hope T-Mobile stays independent because their aggressive pricing will help keep everyone’s plan costs in line.

Alternatively, you can get unlimited talk, text, and WiFi/3G data for $25 a month with Republic Wireless (per line, no minimum number of lines). You’ll have to buy one of their phones (Moto G starting at $149).

Credit Karma Offers Free Full Credit Reports, Updated Weekly

CreditKarma.com just announced that they will now provide members a full copy of their TransUnion credit report, free of charge and updated once a week if you log in that frequently. You should see a pop-up once you log in, otherwise navigate to My Finances > Full Credit Report (Beta).

ckfreereport2

Here’s a summary of their offering now:

  • Free TransUnion New Account credit score. Updated once a week. Not a FICO-branded score, but can still be use to track relative changes over time.
  • Free 24/7 credit monitoring of your TransUnion report. Will alert you if there are any changes, in case you’re like me and don’t really need a weekly update of your credit score. This is handy for tracking the location and timing of credit inquiries.
  • Free full credit report of your TransUnion data. Updated once a week. Nice to be able to track any changes down the smallest detail if needed.

Everything is still free with no trials and no credit card required. Either Credit Karma is making some decent money off their website advertising, or the cost of credit reports and scores continues to drop. I think the latter is definitely an overall trend.

Don’t forget the other major bureaus to get your complete credit picture. Get free non-FICO scores and 24/7 credit monitoring from all three credit bureaus (Equifax, Experian, and TransUnion) here. I track and compare all of my free credit scores here.

Rue La La Shopping: Free $25 Credit

Shopping site Rue La La is offering an increased free $25 credit for new members that are referred by existing members until August 6th they changed it to 8/1. Keep in mind the $25 credit will take anywhere from several hours to a day to show up. You’ll know you have it when the credit appears in the top right corner of your screen.

The good news is that the credit also applies towards shipping ($9.95) so that if wanted, you could get anything under $15 for free. Also, once you pay that $9.95, future orders will ship free for the next 30 days. The referrer gets $10 credit as well if you buy something, so thanks ahead of time if you use my referral link.

Now that I have girls that like both pink things and rolling in mud, here’s a dress for $17 that ended up under $2 including shipping. They also have non-clothing items, everything seems rather fashionable. Some examples:

  • Men’s Steals (sort price low to high, ex. $12.99 flask)
  • Household Steals under $25 (sort price low to high, then scroll down)
  • Glam Gifts (sort price low to high)

(Update: A lot of things are getting sold out as this promo gets popular. Their inventory changes daily, I recommend to keep checking later and sort by price.)

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Walmart Savings Catcher: Automated Low Price Guarantee Now Nationwide

(Update: Walmart’s new automated low price guarantee appears to be nationwide now. While still in “beta”, their FAQ has been scrubbed of any geographical limitations. Their inclusions list was changed to add the phrase “most fruits and vegetables.” You must submit receipts within 7 days. Via nicemann of FW. More details below.)

wmcatcherMany stores offer a “low price guarantee” but in reality nobody actually uses them. You have to find the competing price yourself, wait in the returns line, all for the opportunity to argue with the cashier about the validity of your claim. Who wants to do that?

Walmart is has a new feature called Savings Catcher that automates their low price guarantee. Thanks to reader Doug for the tip. Here’s how it works:

  1. Enter the TC Number from your Walmart receipt at walmart.com/savingscatcher or scan the barcode using the Walmart smartphone app.
  2. Savings Catcher compares the prices of the items you bought at Walmart to the advertised prices at the time of your purchase from the print and online versions of weekly print ads of top retailers in your area.
  3. If Savings Catcher finds an advertised price that is lower than what you paid for the same exact item at Walmart, you can get a Walmart Rewards eGift Card for the difference.

This program appears to be available nationwide now. Just for reference purposes, here were the initial test markets and the local competitors they checked against:

  • Atlanta, GA– Aldi, Food Depot, CVS, Food Lion, Dollar General, Dollar Tree, Family Dollar, Ingles, Kroger, Publix, Rite-Aid, Kmart, Target, Walgreens, IGA, Wayfield Foods and Piggly Wiggly.
  • Charlotte, NC– Aldi, Bi-Lo, CVS, Dollar General, Dollar Tree, Family Dollar, Food Lion, Harris Teeter, Ingles, Kmart, Lowes (Food), Target, Rite-Aid, Publix, and Walgreens.
  • Dallas, TX– Albertsons, Aldi, Brookshires, Dollar General, Dollar Tree, Family Dollar, HEB, Kroger, Target and Tom Thumb.
  • Huntsville, AL Market– Aldi, Belle/Food World, CVS, Dollar General, Dollar Tree, Family Dollar, Save-A-Lot, Foodland, Kroger, Piggly Wiggly, Publix, Rite Aid, Target, Walgreens.
  • Lexington, KY– Aldi, CVS, Dollar General, Dollar Tree, Family Dollar, Save-A-Lot, Kroger, Meijer, Rite Aid, Target and Walgreens.
  • Minneapolis, MN– Aldi, Cub Foods, CVS, Family Dollar, Hy Vee, IGA, Rainbow Foods, Shopko, Target and Walgreens.
  • San Diego– Albertsons, CVS, Dollar Tree, Ralph’s, Rite Aid, Vons, Smart & Final, Target, Fresh & Easy, Walgreens, Stater Bros and Save-A-Lot.

Savings Catcher applies to your in-store Walmart purchases only. Online prices from competitors don’t count. If you use a manufacturer’s coupon, it will consider the pre-coupon price. You can submit up to 7 receipts per week and 15 receipts per month. Savings are issued on a Walmart gift card that can be used in-store or online. There are item restrictions.

Included:

  • Most groceries such as cereal, rice and most fruits and vegetables except for: store brand items, deli, bakery and weighed items like meat.
  • Consumable items such as paper towels, bleach and trash bags.
  • Health and beauty items such as shampoo and makeup.
  • Select general merchandise items.

NOT included:

  • Store brands, deli, bakery and weighed items like meat.
  • General merchandise items, (including, but not limited to, electronics, media and gaming, toys, sporting goods, housewares, small appliances, home décor, bedding, books and magazines, apparel and shoes, jewelry, furniture, office supplies and seasonal products).
  • Non-branded items.
  • Tobacco, firearms, gasoline, tires, prescription drugs, optical and photo products and services, or products that require a service agreement such as wireless, automotive or financial products.

How much should you expect back? One frequent shopper reports 2-3% back, via DailyFinance:

Anne Jurchak was part of Walmart’s focus group. She said she’s been getting back $5 to $7 on her weekly trips to Walmart in which she typically spends $200 to $250. Jurchak has used those savings to buy holiday stocking stuffers and a case for her e-reader.

Keep in mind that like many other savings programs like CVS ExtraCare and Safeway Club cards, this will collect data on you and basically track your spending to your SavingsCatcher account. I personally don’t worry about that kind of stuff too much, but FYI.

Horizon Motif Review: Commission-Free, No Advisory Fee, Index ETF Portfolios

motiflogoMotif Investing is a discount brokerage with a twist: you can buy a basket of up to 30 different stocks or ETFs and the entire basket costs just $9.95 a trade. When I first heard of this company, I thought it would be a cool way to build your own custom ETF. It could be dividend income stocks, your own balanced fund of stocks and bonds, whatever. You can start with as little as $250 and they use fractional shares so all your money is invested.

But you could also make a diversified portfolio of low-cost index funds. Motif went one step further and introduced their own Horizon motifs, which come with zero trade commissions as well as no management fees. There are 9 different Horizon Motifs – you pick one of three time horizons (1 year, 5 year, or 15 year) and one of three risk levels (conservative, moderate, or aggressive). Consisting mostly of Vanguard and iShares ETFs, here is the asset allocation for their 15-year, aggressive portfolio:

  • 27% US Stocks (VTI)
  • 17% International Stocks (VXUS)
  • 8% US Real Estate (VNQ)
  • 5% Commodities (GSG)
  • 27% International Total Bond (BNDX)
  • 16% US Total Bond (BND)

Overall, the asset allocation portfolios are pretty similar to those offered by other brokerage firms, mutual fund companies, and “robo-advisor” online portfolio managers. I would note that compared to their competitors’ asset allocation models, Horizon Motifs as a whole have a slightly greater allocation to bonds. Usually an “aggressive” long-term portfolio has 70% to 90% in stocks, while Motif has roughly 60%. Their 15-Yr Conservative is ~50% stocks and their 15-Yr Moderate is ~40% stocks. You can adjust the relative percentages of the ETFs inside the Motif, but that will change it to a custom Motif and thus trades will cost $9.95. (I tried.)

I have an Motif Investing account, and here is confirmation that the trade commission is zero and an illustration of how fractional shares work (click to enlarge):

horizon_small

Horizon Motifs can be a great way for beginner investors to get started without getting eating alive by fees. The impact of zero commissions is greatest when your portfolio size is small. For example, paying $10 commission on a $250 monthly deposit is an instant 4% drop in your balance. Through this whitepaper, I found that the Motif is rebalanced based on tolerance bands linked to time and percentage variations. Rebalancing would be free as well since it is usually just charged as one trade.

I don’t know anywhere else you can buy a basket of 6 low-cost ETFs for $250 with no commission and have every dollar split into fractional shares so that you are always fully invested and have it rebalanced for you regularly for free. Once you start investing larger amounts down the road, then you can switch to something more customized if desired.

To answer a reader question, Motif is a “real” brokerage firm with the usual $500,000 of SIPC insurance and uses Apex as their clearing firm (same as TradeKing, Betterment, OptionsHouse). They also offer two-factor authentication for security.

Motif Investing does have some new customer promos, but some won’t apply if you only make free trades. You can get a $150 cash bonus if you deposit $2,000 and make 5 trades at $9.95 each. They also have a $150 IRA promotion if you transfer over $5,000 in assets.

Covestor Core Portfolios Review: Free Managed ETF Portfolio

covlogoLow-cost index ETF portfolio are everywhere these days! Covestor is a site that usually charges you a fee to manage your portfolio to follow various active managers, with fees ranging up to 2% per year (split Covestor/manager 50/50). However, they recently introduced their Covestor Core Portfolios, which consist of passive ETFs from providers such as Vanguard and Blackrock iShares. These have no management fees, so you’ll just pay the expense ratios of the underlying ETFs plus any trading commissions. Total trading commissions are estimated at $20 annually (investments held at Interactive Brokers, average trade runs about $1, no markup charged). There is a $25,000 minimum investment required.

The three initial portfolios are the Covestor Core Moderate (40% stocks, 60% bonds), Core Balanced (60% stocks, 40% bonds) and Core Growth (80% stocks, 20% bonds). Periodic rebalancing will be done to maintain risk-return profile. Unfortunately, you can’t see the exact portfolio asset allocations without having an account (why not??), but you can try and tease most of the info out of what they give you. Let’s take the top 5 holdings of Core Growth:

  • 34.7% Total US Stock (VTI)
  • 21.4% Emerging Markets Stock (VWO)
  • 19.2% Developed International Stock (VEA)
  • 7.2% Total US Bond (AGG)
  • 5.1% US REIT (VNQ)

The top 4 stock ETFs add up to 80.4%, which must be all the stock ETFs that they use. Broken down in terms of stock asset allocation only, that is 43% Total US, 27% Emerging Markets, 24% Developed International, and 6% REITs.

Let’s take the Top 5 holdings of Core Moderate:

  • 31.8% Total US Bond (AGG)
  • 29.7% Total US Stock (VTI)
  • 10.1% Treasury Inflation-Protected Securities TIPS (TIP)
  • 9.2% Commodities (DJP)
  • 5.6% Emerging Markets Stock (VWO)

Total US Bonds and TIPS only add up to 41.9%, but there are supposed to be 60% bonds, so I’m a bit confused. My guess is that their commodities futures ETN (DJP) is considered fixed income? Usually commodities futures are considered equity-like or an alternate asset class. I suppose they are collateralized by T-Bills, but still even added in, that’s only 51.1%. Still confused.

What about competitors? At a $25,000 portfolio balance, Betterment would charge $62.50 a year and Wealthfront would charge $37.50 a year (first $10k free). At a $250k portfolio balance, Betterment would charge $375 a year and Wealthfront would charge $600 a year (first $10k free). Vanguard Personal Advisor Services has a $100,000 minimum, but includes regular interaction with a CFP and costs 0.3% a year (a $250k portfolio would cost $750 a year). All include any trading commissions in their fees.

All in all, the lack of transparency and also lack of the asset allocations making sense don’t have me very interested in Covestor Core Portfolios, but it is definitely part of an accelerating movement towards having low-cost index funds as your primary investment holding. Remember, with a little learning you can easily DIY all this for “free” as well and maintain full control over your investments.

More: Barron’s (their asset allocation percentages are wrong, they assume the Top 5 holdings are the entire portfolio), ETF.com

TradeKing Advisors Review: Managed Core and Momentum ETF Portfolios

tkalogoAnother online ETF portfolio advisor joins the mix. Discount brokerage TradeKing, possibly best known for their $4.95 stock trades, announced a new subsidiary called TradeKing Advisors which will directly manage ETF portfolios for retail customers. Details:

  • Portfolio asset allocation designed and monitored by Ibbotson Associates. There will be Core and Momentum portfolios.
  • The portfolio will be determined by an 8 question risk questionnaire.
  • TradeKing Advisors will manage and rebalance portfolio as needed to stay on target. Assets will be held at TradeKing brokerage.
  • Management fee of 0.75% of account balance annually for Core portfolios, minimum initial investment of $10,000. For Momentum portfolios, 1% management fee and $25k minimum account size. For account balances over $250,000, the fees for each portfolio are reduced to 0.50% annually.

Per their website, their “strategies include a diversified allocation of up to 20 asset classes – including fixed income, equities, real estate and foreign investments – implemented cost-effectively with ETFs.” I could not find any specific information about the asset allocation of these ETF portfolios or the ticker symbols used.

But that’s okay, as I pretty much stopped listening when the fees were listed at 0.75% for a basic index ETF portfolio. It may be less than what E*Trade charges but in my opinion that’s still too much to pay for any ETF portfolio, and much more than many other services like Betterment and Wealthfront that do pretty much the same thing also with a slick user interface. Supposedly TradeKing will differentiate themselves with their “exceptional customer service”. As a TradeKing brokerage customer, I found their customer service fine and Live Chat is nice but not worth another 0.40% to 0.50% annually as you don’t even get assigned a Certified Financial Planner or CFA. So far it just sounds like an expensive robo-advisor. In that case, I will pass.

Infographic: Income for Maximum Happiness For All 50 States

You may have read that a Princeton University study by Deaton and Kahneman found that people were more satisfied with their life as their income rose, but only until about $75,000 a year. After that, higher income did not result in greater happiness. Doug Short of DShort.com extended this $75,000 number and adjusted it by the cost-of-living for all 50 states. The Huffington Post in turn converted that table into a nice pretty infographic map. I’ve mentioned this finding before and readers pointed out that $75k goes farther in some places compared to others, so it is shared below.

happy50

Money can only buy happiness up to a point. But just how much you need to get to that threshold really depends on where you live, according to a new analysis by Doug Short, vice president of research at investment group Advisor Perspectives.

Short’s analysis found that if you live in a place like Hawaii, where the cost of living is relatively high, a household needs to make $122,175 per year before some extra cash doesn’t really translate into more happiness. In Mississippi, by comparison, the threshold at which more money stops making you happier is a lot lower: $65,850 per year.

Of course, the next link on HuffPo was… More Money Always Leads To More Happiness: Study

Groupon Deal: Sam’s Club Membership

samslogoAvailable again. Groupon has a special Sam’s Club Plus membership deal where for $45 you get:

  • One-year Sam’s Club Savings membership ($45 value), which includes a membership card for the primary cardholder and a complimentary membership card for a spouse or other household member.
  • $20 Sam’s Club gift card
  • Four Fresh-food vouchers, redeemable at the time of membership activation through Monday, October 27, 2014 (a $26.23 value), including:
    • Sliced oven-roast turkey (22 oz. – $7.98 value)
    • Ciabatta rolls (8 ct. – $3.99 value)
    • Black bean five-layer dip (28 oz. – $7.98 value)
    • Apple pie (10” – $6.28 value)

Valid at any Sam’s club location. New members only, which is defined as someone who does not have a currently valid membership. Remember that you can save even more on your Groupon with cashback shopping sites like eBates ($5 new customer bonus), Mr. Rebates ($5 bonus), and BigCrumbs.

Kindle Unlimited Review: Personal Finance and Investing Books

kindleu2Amazon has just announced Amazon Unlimited, an eBook and audiobook subscription service that costs $9.99 a month (30-day free trial) and not included in Amazon Prime. They claim over 600,000 titles in their library, although that number is padded by a lot of little-known self-published eBooks. “Thousands” of those books come with free audiobook versions. You can read unlimited books (max 10 out at once) and on any Kindle app (Windows, Mac, web browser, iPhone/iPad, Android, etc).

It’s a library card with 24/7 instant availability, but how well-stocked is this virtual library?

My personal reading habits include mainly business, personal improvement, and finance books. I compiled a list of notable books that I have read or want to read first, and then checked if Amazon Unlimited had it. I’m also including the findings from my Oyster review (a competing eBook app) for comparison purposes.

Book Oyster.com Amazon Unlimited
William Bernstein’s Recommended Reading List for Young Investors
The Millionaire Next Door: The Surprising Secrets of America’s Wealthy by Thomas Stanley and William Danko. Yes No
Common Sense on Mutual Funds by Jack Bogle. Yes No
Devil Take the Hindmost: A History of Financial Speculation by Edward Chancellor. No No
The Great Depression: A Diary by Benjamin Roth. Yes No
Your Money and Your Brain by Jason Zweig. Yes No
How a Second Grader Beats Wall Street by Allan Roth. Yes No
All About Asset Allocation by Rick Ferri. No No
5 Recent Bestsellers
Flash Boys: A Wall Street Revolt by Michael Lewis. No Yes
Pound Foolish: Exposing the Dark Side of the Personal Finance Industry by Helaine Olen. No No
Think Like a Freak: The Authors of Freakonomics Offer to Retrain Your Brain by Steven Levitt and Stephen Dubner. No No
Capital in the Twenty-First Century by Thomas Piketty. No Yes
Thinking, Fast and Slow by Daniel Kahneman. No No
5 Personal Favorite Financial Books
Your Money or Your Life by Vicki Robin and Joe Dominguez. No No
Work Less, Live More: The Way to Semi-Retirement by Robert Clyatt. Yes No
The Richest Man in Babylon by George S. Clason. No No
The Four Pillars of Investing by William Bernstein. No No
A Random Walk Down Wall Street by Burton G. Malkiel. No No

 
* Oyster catalog checked June 2014 and Amazon Unlimited checked July 2014.

Recap

In the “major publisher, popular, well-reviewed” category, Oyster wins hands-down. AmazonUnlimited reportedly does not have any of the major “Big 5” publishers (they are not BFFs right now). In the “recent business bestseller” category, neither is great but Amazon actually has a slightly better showing. Many of Michael Lewis’s other books are also on AmazonUnlimited (The Big Short, Liar’s Poker, The Blind Side). In the “niche DIY early retirement personal finance nerd” category, again neither does great although Oyster technically wins by a nose.

Bottom line: Amazon Unlimited has a relatively limited catalog for personal finance enthusiasts.

Keep in mind that the Amazon Kindle Owner’s Lending Library still exists (at least for now) and boasts 500,000+ titles (again padded by self-published eBooks). The Kindle Lending Library is free if you already have both a Kindle (any model) and an Amazon Prime subscription. You can only read on a Kindle device though, and you only get one title per month.

There are some promising titles available if you dig around, for example I noticed that William Bernstein’s “Investing for Adults” series of books (The Ages of the Investor, Skating Where the Puck Was, Deep Risk, and Rational Expectations so far) are all available with both Kindle Unlimited and Kindle Lending Library.

Personally, I might sign-up for the free trial and read whatever books I can during that window and maybe it’ll spill over for a month (though you can cancel now and still enjoy you free month without worry of auto-bill), but I can’t see myself paying $120 a year for a limited selection of books (that interest me) that I can’t keep forever.

Free FICO vs. non-FICO Credit Score Comparison

Updated with new scores. There are many free credit scores are available nowadays, but how do they compare in real life? There are three major credit bureaus – TransUnion, Equifax, and Experian – which all may have slightly different information about you in their database. Here I keep track of all of my available “free” scores (some require specific credit card or other membership) while noting the bureau data used.

  • Discover FICO (TransUnion) – FICO score available free to Discover card holders. Based on the FICO 08 scoring model. Updates monthly. I get mine from the Discover it® card that features 5% cash back in rotating categories and no annual fee.
  • Barclaycard FICO (TransUnion) – FICO score available free to Barclaycard holders. Based on the FICO 08 scoring model. Updates sporadically, usually every 1-2 months. I get mine from the Barclaycard Arrival Plus(TM) World Elite MasterCard that offers great travel rewards.
  • Credit Karma (TransUnion) – Educational credit score available free to members of CreditKarma.com. Based on the TransUnion New Account scoring model. Updates as often as once a week if you log in that frequently.
  • Capital One (TransUnion)- Educational credit score available free to Capital One card holders. Based on the TransUnion New Account scoring model, it updates monthly. I get mine from the Capital One Quicksilver Cash Rewards card, which offers a flat 1.5% back on all purchases, $100 sign-up bonus when making $500 in purchases during the first three months, and no annual fee.
  • Credit Sesame (Experian) – Educational credit score available free to members of CreditSesame.com. Based on the Experian National Equivalency scoring model. Updated up to once a month if you log in.
  • Quizzle (Equifax) – Credit score available free to members of Quizzle.com. Based on the VantageScore 3.0 scoring model. Updated up to twice a year if you log in.

Based on the data points I have collected so far, it does support that the two FICO scores provided by the Discover and Barclaycard are the same (both are part of the FICO Score Access program and use FICO 08 formula) and the Credit Karma and Capital One scores are also the same (both use TransUnion New Account formula).

As for FICO vs. non-FICO, even though they may be based on the same TransUnion credit report and are in the rough approximate range, the scores given can differ by up to 30-50 points. In this individual case, the other non-FICO scores from Experian and Equifax are actually consistently closer to the reported TransUnion FICO scores.