1/31/2012 3:47 PM ET|
When are credit scores free?
A reader wants to know why stores that pull credit scores when you apply for credit don't tell you what the number is -- and how the scores work in general.
Q: I'm curious as to why, when you apply for credit, no one will tell you your credit score. They tell me it's against the law. Why is that, if it's my score? Do the different reporting agencies list different credit scores, and what is the highest credit score that you can receive?
A: Lenders are required to disclose credit scores in any risk-based pricing notices (on rate increases, for example) and adverse action notices (credit denials, for example) under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Since July 21, 2011, lenders are required to tell you your credit score if you've been denied credit.
There are three parties here: you, the lender and the consumer reporting agency. Disclosure of your credit score(s) not covered by Dodd-Frank is controlled by the provisions of the Fair Credit Reporting Act.
The Fair Credit Reporting Act doesn't require the consumer reporting agency to disclose to a consumer any information concerning credit scores or any other risk scores or predictors relating to the consumer. That said, the consumer does have the right to buy a credit score from a consumer reporting agency.
When you apply for a mortgage, the Fair Credit Reporting Act requires the lender to disclose your credit score as distributed by the consumer reporting agencies. The lender can customize this score in the loan-underwriting process, and that custom score is not available to you.
The three main consumer reporting agencies are Equifax, Experian and TransUnion. Since your credit score is based on the information on your credit report, credit scores can vary by agency. The following table shows the range of credit scores.
TransUnion's website lists the range for the FICO score. All three agencies use FICO's mathematical models as a starting point for their proprietary credit scores.
Basically, the consumer reporting agencies have credit scores they provide to consumers and credit scores they provide to businesses. The two are related but not the same. Credit scores are only one factor that goes into the lending decision. A lender can look at other variables as part of its decision to extend credit.
You can get a three-agency credit score for $39.95 or less. Be careful not to sign up for credit monitoring as a condition of getting that report, or if you do, cancel within the trial period. Consumers don't generally need credit monitoring services.
You can fix a poor credit score. Making timely payments on your bills and reducing your outstanding credit card balances are the places to start.
Negative information stays on your credit report for seven years, with the exception of a Chapter 7 bankruptcy petition, which stays on your credit report for 10 years. It's what's on your credit report that determines your credit score. You can get one free credit report per year from each of the consumer reporting agencies. I recommend putting them on a cycle where you rotate through the three agencies, getting a different agency report every four months.
More from Bankrate:
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The last paragraph explains you are entitled to a free report each year and also suggests you review one every four months to keep up to date with your credit information! Maybe you should reread the articles before you post a comment, then you wouldn't look so stupid.
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