The feds just expanded the pool of people likely to see their scores. Initially, the Dodd-Frank financial reform law requiring credit score disclosure was assumed to apply only to people who were either turned down for credit or who didn’t receive the best rate and terms. Now, according to final rules released yesterday by the Federal Reserve and Federal Trade Commission, anyone who applies for credit after the July 21 implementation date is likely to see their scores, said John Ulzheimer, author of “You’re Nothing But a Number” and a credit expert who offered advice to U.S. Senator Mark Udall, who drafted the credit score provision.
There are a few narrow exceptions allowing lenders not to disclose the scores, but Ulzheimer believes that for simplicity and compliance many banks will default to always disclosing a score.
“It’s awesome,” he said. “The vast majority of consumers who apply for anything in the financial services arena are going to see their score, even if you’re approved for the best rate and terms.”
There’s a lot of confusion about credit scores. Many people erroneously assume they have the annual right to see their scores for free, which isn’t true (you have a right to see your three credit reports, not your scores, via www.annualcreditreport.com). The only scores you have a right to see are the ones your mortgage lender uses to grant or deny you a home loan; that’s been true since 2004. Otherwise, though, you typically haven’t had free access to your scores.
People also believe that the scores they buy from the credit bureaus or get for free from various Web sites are the same scores lenders use; typically, that’s not the case. To see two of your three available FICO scores, you’ve had to buy them from MyFico.com at $19.95 a pop. (The third credit bureau, Experian, no longer sells FICO scores to consumers, although it continues to sell them to lenders.)
The new disclosure rules do not, unfortunately, extend to insurance companies as originally expected. Insurance companies use insurance scores, rather than credit scores, to determine premiums. Insurance scores use credit bureau data, just as credit scores do, but the feds decided insurance scores were different enough in form and function not to qualify for the new disclosures.
Still, this is great news for consumers, and yet another step in lifting the veil of mystery that’s surrounded credit scoring for too long.