The Dodd-Frank Act and Your Credit Score

by Sylvia Burleigh

The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law last summer and millions of credit card holders have benefited from much of its regulation.  Consumers now receive notifications for rate or fee increases, statements now inform cardholders how long it will take to pay off a balance, and credit issuers are required to mail bills at least 21 days before the payment due date.  All of the Federal Reserve Board’s new rules focus on providing consumers with much-needed protection.

In January of this year, the Federal Reserve approved a final rule that allows consumers seeking credit to receive notification about their credit score.  This notification is sent after a consumer has applied for credit.  It simply states their credit score, which credit bureau —Equifax, Experian, and TransUnion—supplied the score, and other information such as  how well their credit score compares to other consumers’ scores who have applied for that same loan.

However, not all credit applicants will receive a credit score notice.  If you have a less-than-perfect credit score or other negative information on a credit report, you may receive a “risk-based pricing notice”.  While it will not state your credit score, it will state that you were given a higher annual percentage rate (APR) due to your credit risk, and also disclose which credit bureau provided the lender with the credit information.

Credit Issuers Will No Longer Have a Choice

On July 21st, it will change again for lenders and credit card issuers.  They will no longer have a choice when sending out credit score disclosures. In fact, all credit issuers, regardless of loan type, must disclose the credit score to all applicants whether they’ve been given a higher rate or denied the loan.  However, the new rule only applies to consumers who have been denied credit or who have applied for credit where credit scores were used in establishing the terms of the credit or loan agreement.  The rest of us have options but at a price.

Credit scores are not like credit reports where you’re legally allowed one free report from each of the credit bureaus. If you’re interested in obtaining a credit score, you might try MyFico.  MyFico offers credit scores for various fees and include credit reports from any of the credit bureaus.  Some products also include credit monitoring.

  • Equifax has various programs that include reports with credit monitoring as well as a one-time offer of a credit score with a credit report for $15.95.
  • TransUnion supplies your credit score with their credit monitoring service.  If you click “Get Your Free Credit Score” you’ll transition to their credit monitoring program, seven-day free trial.  So in a sense, yes free for seven days only.  After 7 days, you’ll pay $14.95 a month which, of course includes the credit monitoring.
  • Experian allows consumers to check their credit score online for a fee of $14.95 which includes a credit report.

Know What Credit Score Your Buying

Lenders have traditionally used FICO scores, a range from 300 to 850, to determine a consumer’s credit risk, but recently VantageScores have gained in popularity.  VantageScores were developed in partnership by the three credit bureaus and can rank anywhere between 501 and 990.   Both TransUnion and Experian sell both FICO scores and VantageScores.  Equifax only sells FICO scores.

Don’t be too surprised to receive different credit scores from each of the three credit bureaus.  Credit scores will be different because not all lenders and credit issuers report to all three credit bureaus and the information provided may have discrepancies.

Sources:

http://www.federalreserve.gov/consumerinfo/wyntk_notices.htm

http://dodd-frank.com/fed-and-ftc-propose-rules-regarding-credit-score-disclosures/