Finally! More access to free credit scores
New federal rules will expand consumers' right to review their all-important credit scores, and they won't have to pay to see them.
This post comes from Liz Weston of MSN Money.
The next time you apply for credit, chances are very good you'll see the credit scores used to judge you -- for free.
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 Wednesday 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 credit scoring expert John Ulzheimer, author of "You're Nothing But a Number" and a credit expert who offered advice to U.S. Sen. Mark Udall, D-Colo., who drafted the credit score provision.(Meanwhile, estimate your credit score for free.)
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.
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"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 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. Post continues after video.
People also believe that the scores they buy from the credit bureaus or get for free from various websites 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.
MSN Money columnist Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy."
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The real problem is that no one seems to understand that without credit score the whole sub-prime mortgage situation never would have existed.
Credit score were used to make instant decisions instead of actually looking at a person's credit worthiness. Skipping this part of the process let mortgage brokers get out of control. The real work would have slowed them down affectively dampening the volitility.
Credit score should be legislated out of existance. They provide no added value.
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