Published: Sunday, July 17, 2011
New rule on effect of credit scores
Consumers who are denied credit or whose existing loan terms become less favorable soon will be able to get free credit scores under new rules from the Federal Reserve Board and Federal Trade Commission.
As part of the Dodd-Frank Wall Street Reform & Consumer Protection Act, the two regulators recently issued final rules related to new credit-score disclosures.
Effective this Thursday, if a credit score is used to set certain credit terms, or to deny or revoke credit or change existing terms, then banks and others will be required to disclose credit scores and related information to consumers.
Besides the consumer's credit score, the lender also must disclose the range of possible scores under the model used to generate the score; the date on which the score was created; the name of the consumer reporting agency or entity that provided the score; and up to four key factors that hurt the credit score, or up to five factors if the number of inquiries made into that consumer's credit report is a key factor. Numerous inquiries into a consumer's credit report can suggest that the consumer has been out shopping for credit and might be financially stressed.
Credit scores are often used by lenders to set or adjust loan terms, such as interest rates charged, and can change over time to reflect changes in a borrower's history.
As part of the Dodd-Frank Wall Street Reform & Consumer Protection Act, the two regulators recently issued final rules related to new credit-score disclosures.
Effective this Thursday, if a credit score is used to set certain credit terms, or to deny or revoke credit or change existing terms, then banks and others will be required to disclose credit scores and related information to consumers.
Besides the consumer's credit score, the lender also must disclose the range of possible scores under the model used to generate the score; the date on which the score was created; the name of the consumer reporting agency or entity that provided the score; and up to four key factors that hurt the credit score, or up to five factors if the number of inquiries made into that consumer's credit report is a key factor. Numerous inquiries into a consumer's credit report can suggest that the consumer has been out shopping for credit and might be financially stressed.
Credit scores are often used by lenders to set or adjust loan terms, such as interest rates charged, and can change over time to reflect changes in a borrower's history.
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