Starting July 21st, 2011 consumers will be able to get their credit score for FREE.
Under final rules issued by the Federal Trade Commission and Federal Reserve Board to reflect the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act, creditors must disclose the credit score used and additional information related to the score if the consumer receives less-than-favorable loan terms as an applicant or existing customer. Consumers who are denied credit because of their score also receive the score and the additional information.
So what can consumers expect to see in the new credit score disclosure? Besides the score, it will include the range of possible credit scores under the model, four key factors that hurt the score - the number of inquiries can be added as a fifth factor - the date the score was created and the reporting agency that provided it.
Why is this such exciting news? Now consumers will be getting the ACTUAL credit score a lender or financial institution used when evaluating your credit profile for approval!
Before July 21, when consumers got a free copy of their credit report, it didn't include a credit score. When you purchase a credit score, you are purchasing a general consumer based credit score that more than likely is much different from the one the lenders uses.
When lenders pull credit, they have a specific
permissible purpose, and their credit score is based on a specific type of risk modeling. The formulas for each risk model vary slightly. For example a car loan is calculated on factors somewhat different than those for a mortgage, personal loan and so on. Since the calculations are slightly different, so are the final scores. Now, with the new ruling, consumers will be able to see EXACTLY what a bank or finance department saw when they requested an inquiry into their credit score.
As always, there are a handful of exceptions to the new rule. If lenders use an in-house system for determining creditworthiness and bypass the bureaus, or if they don't use a credit score to make their decisions, they don't have to provide the consumer with a score. However the majority of mainstream lenders use credit scoring in their approval process. This new ruling allows consumers access to learning more about why they were declined, and what they can do change and better their credit rating.
