article Lenders to Provide Millions of Free Credit Scores in 2011 in myFICO Blog

Lenders to Provide Millions of Free Credit Scores in 2011

Barry — Wed, 26 Jan 2011 23:05:50 GMT

An important new amendment to the Fair Credit Reporting Act, known as the Risk-Based Pricing Rule, went into effect on January 1, 2011. Now, lenders are required to notify a consumer when a lending decision, based on their credit score or credit report, results in credit terms that are less favorable than those offered to other borrowers. Less favorable terms may include a higher interest rate or larger down payment requirement. Notification by the lender will be in the form of a disclosure notice that is either enclosed with the credit approval package or sent separately to the consumer.

Re: Lenders to Provide Millions of Free Credit Scores in 2011

MarineVietVet — Thu, 27 Jan 2011 02:00:56 GMT

Can I assume that the part that says:when a lending decision, based on their credit score or credit report, results in credit terms that are less favorable than those offered to other borrowers that this will include outright denial of credit? Common sense tells me it should but often creditors seems to lack that virtue.

If that seems like a silly question forgive me.

I think if scores (FICO) are offered instead of reports this is a good thing for consumers since reports are readily available now.

Re: Lenders to Provide Millions of Free Credit Scores in 2011

Barry — Thu, 27 Jan 2011 20:59:54 GMT

Hi Marinevietvet,

Good question! For denials of credit, consumers will continue to receive adverse action notices that provide access to a free credit report and the top reasons why the score was not higher, but not the score used in the lending decision. ScoreInfo.org has more to say about adverse action notices.

-Barry

Re: Lenders to Provide Millions of Free Credit Scores in 2011

MarineVietVet — Thu, 27 Jan 2011 22:01:28 GMT

"For denials of credit, consumers will continue to receive adverse action notices that provide access to a free credit report and the top reasons why the score was not higher, but not the score used in the lending decision".

It would be nice to know what score you had for outright denial though.

Perhaps this will change some time in the near future

Thanks Barry.

Re: Lenders to Provide Millions of Free Credit Scores in 2011

8SuperMom8 — Tue, 01 Feb 2011 15:27:05 GMT

What about Auto Insurers who use FICO as a means of assessing risk / pricing? Will they also be impacted under this new regulation? Wireless Providers?

Re: Lenders to Provide Millions of Free Credit Scores in 2011

IOBA — Wed, 02 Feb 2011 21:21:52 GMT

Good questions. If we are going down that path, will utility companies who use credit to determine if a deposit (and how much of a deposit) will be needed have to disclose the same information?

hhmmm...things we want to know!

Re: Lenders to Provide Millions of Free Credit Scores in 2011

Barry — Thu, 03 Feb 2011 00:58:44 GMT

Hi 8SuperMom8 and IOBA --

FICO doesn't believe insurance carriers and utilities, including wireless providers, are affected by the Risk-Based Pricing Rule. The Rule applies when credit information is checked in connection with an application for credit.

That is, while credit information may be used by insurance companies, wireless providers, utilities, landlords, etc., these businesses aren't granting "credit." And as a result, they aren't impacted by the Risk-Based Pricing Rule.

-Barry

Re: Lenders to Provide Millions of Free Credit Scores in 2011

IOBA — Thu, 03 Feb 2011 02:58:06 GMT

I hope in the future, they will have to disclose more information -- basically be more transparent -- about how our credit report and FICO scores affect our insurance rates & utility deposits. :) It would be nice to know!

Re: Lenders to Provide Millions of Free Credit Scores in 2011

veracious — Mon, 21 Feb 2011 17:43:21 GMT

What, exactly, are tiers and how do lenders develop them.

I read that score ranges determine the tiers. Is this true?

Lenders have many criteria for developing their lending practices.

If scores were a major part of decisions, why have lenders been so reluctant

to provide them. I think they have been playing with this law for over six years.