The U.S. Senate's approval last week of a far-reaching financial regulatory bill carries great news for consumers in an increasingly credit-sensitive world.
Contained in the bill is a requirement that companies provide you with the credit score they used to deny you credit, impose a higher interest rate on your loan or prevent you from being hired for a job.
"I'm very pleased that the bill includes my credit score amendment, which is going to help arm consumers with the information they need to take control of their own financial health," said Sen. Mark Udall, D-Colo.
The legislation still needs to be reconciled with a similar House bill that doesn't include the provision. "I'm going to work to make sure it's included in the final bill that goes to the president's desk," Udall said.
He sees a simple logic that argues for the provision.
"If you are turned down for a loan - or for a home - because of your credit score, you shouldn't have to turn around and pay for the information that was used against you," he said. "With this change in the law, thousands more hard-working Americans would be able to get that information for free - at the time it matters most."
Currently, you're entitled by law to receive a free credit report every 12 months from each of the three national credit bureaus. You can get your report by going to www.annualcreditreport.com. Go only to that site.
But your free credit report does not include a free credit score. I've long said this is a huge gap that needs to be shut tight.
Yes, your credit report is important to have because your credit score reflects the information in the report - whether you've paid your bills on time, whether you're carrying too much debt, etc.
But credit scores have become such an integral part of financial life that consumers should have easier access to theirs.
Currently, if you want to know your credit score, in most cases you have to buy it. You have to fork over $15.95 to get your FICO score, which is the dominant score used by lenders. The score range is 300-850.
Credit bureaus also sell their own proprietary credit scores.
Things need to change.
There are a limited number of circumstances under which you can get your credit score for free:
- Mortgage lenders must give consumers the credit scores they used in deciding whether to give them a loan.
- Some websites will give consumers a free credit score, but it's not the FICO score. Still, these scores can give you an idea of the factors that go into calculating your score and how you can improve your score.
Starting in January, lenders also will be required to give anyone who is offered credit at less than the best interest rate a copy of the credit score used in making that decision.
"The Udall amendment fits nicely into the same context in that here's another opportunity for consumers to learn their score in the context of a specific lender decision," said Craig Watts, FICO spokesman.
Knowing their scores will "help consumers understand why they were denied so they can improve their credit management and qualify the next time they apply," he said.
The timing for Udall's amendment is perfect, said John Ulzheimer, president of consumer education at Credit.com, a credit information and education website.
"The momentum has been building behind free credit scores since 2002, when people were debating free credit reports," Ulzheimer said.
The next step should be to ensure that consumers can get their credit scores for free on demand, just as they can get their credit reports.
It won't be easy to get this passed, because credit bureaus are firmly against giving away their product.
Still, I believe it's a matter of time before we'll be able to get free credit scores on demand.
The credit score is critical in determining what interest rate you pay and whether you get a loan at all. It's just too critical a piece of information for consumers to have to jump through hoops to get it.
(c) 2010, The Dallas Morning News.
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