As of July 21, any consumer who gets turned down for either credit cards or auto loans is now able to receive a free copy of their FICO credit score. This new rule is a provision of the Dodd-Frank financial reform law that was recommended by Democratic Senator Mark Udall of Colorado.
According to Udall, “The purpose for the law was to provide consumers with greater access to and information about their credit scores. By seeing the clearest picture possible of their personal finances, consumers can actively work to improve their scores.”
A credit score is something which affects a consumer’s eligibility to obtain loans, mortgages, credit cards and insurance products. The credit scores most-often analysed in risk-based lending are issued by FICO (Fair Isaac Corp.) and assess a potential borrower’s creditworthiness. A FICO credit score of 760 or higher on a scale ranging from 300 to 850 is considered to be an “elite credit score” and one that will avail that individual to prime interest rates.
If denied a credit card, for example from a lending company such as Providian, or an auto loan, the new rule states that the applicant is then entitled to not only their FICO score but also the four greatest reasons that the score is not higher, such as delinquent accounts, especially low debt to credit ratio or a long history of late payments. Additionally the provision obliges risk-based lenders to avail borrowers of their FICO score for free should they not qualify for choice interest rates.
Senator Udall believes that making the credit scores of some consumers available to them at no cost is “a step in the right direction” toward transparency in consumer finance. 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.”
Prior to Udall’s provision, all consumers were entitled to receive a free annual printout of their credit report which did not include their actual FICO score. Anyone not eligible for a free credit score under the provision can go to myFICO.com and purchase a copy of their credit report and FICO score for $19.95.
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