There are many changes coming to pass as a result of the Dodd-Frank financial reform law that was passed last year. One new rule that went into effect on July 21 entitles anyone who has their credit card or auto loan application rejected to receive a free copy of their credit score. This rule specifically pertains to any financial-services company that uses an individual’s credit score to determine whether or not to issue a loan.
Currently, all consumers are entitled to receive a free printout of their credit report annually, but this does not always include their actual FICO score.
Providing certain consumers with their credit score at no cost is “a step in the right direction” toward transparency in consumer finance, according toSenator Mark Udall (D-CO) who put forward the provision.“We already require that consumers be provided a free annual credit report. I think we ought to go all the way and allow consumers to access their credit scores for free as well.”
Credit scoring has been in effect since the early 1980s. The scores most-often used are the ones issued by FICO, a Minneapolis-based company that ranks consumers according to their financial health and creditworthiness on a scale from 300 to 850, with the higher the number, the better. This score affects an individual’s ability to get credit cards, insurance, loans and also the interest rates associated with such products. Any borrower possessing an “elite credit score,” a FICO score of 760 or higher, would be eligible for the best interest rates on offer.
Udall’s provision also requires that lenders, if employing the practice of risk-based lending, inform borrowers of their score if they do not qualify for prime rates. Provided alongside the credit score must also be the four primary reasons for the score not being higher. Delinquent accounts is one frequently-cited reason.
“The purpose for the law was to provide consumers with greater access to and information about their credit scores,” explains Udall. “By seeing the clearest picture possible of their personal finances, consumers can actively work to improve their scores.”
Any consumer that isn’t able to receive their credit score for free under the provision can go online to myFICO.com and pay $19.95 for their FICO credit score and report.