Do you remember the Dodd-Frank Wall Street Reform and Consumer Protection Act? Probably not, so here’s a quick refresher. Signed into law by President Obama in 2010, the Dodd-Frank Act brought sweeping change to how financial markets are regulated in the United States.
Included in the act was a well-known provision called the “Risk-Based Pricing Rule”, which entitled many consumers to obtain free credit scores if they were either declined credit or offered less than favorable terms. If the lender didn’t provide a free score, they were required to at least send a notice that allowed applicants to obtain free credit reports instead.
While this change was a huge step in the right direction, a lot of consumers still felt like they deserved the right to see the credit scores lenders used, even if they were approved and received the best terms possible. Now, here we are six months later, and the rules have changed yet again. Fortunately, it appears the situation has gotten even better for consumers.
In fact, there’s a good chance you’ll receive free copies of your credit score the next time you apply for a credit card – regardless of whether you’re approved or not. Actually, free scores aren’t limited to just credit cards. As of July 21st, 2011, if you apply for practically any financial product, you will likely receive free copies of your credit scores from the lender reviewing your application.
According to a press release issued by the Federal Trade Commission on July 6th, 2011, changes were made to the Dodd-Frank Risk-Based Pricing Rule that require creditors to “disclose credit score information to consumers when a credit score is used in setting or adjusting terms.” You’ll notice there’s absolutely no reference to whether the applicant received less than favorable rates or a declination. The Fed and FTC have clearly broadened the wording, which has led some industry experts to believe credit issuers will simply throw in the towel and provide free credit scores to all applicants in an attempt to remain compliant while keeping costs down. Which credit score you’ll get is still up in the air; in most cases, however, what you’re going to see is your FICO score.
Not exactly sure what a FICO score is? The truth is credit scores confuse most Americans. And that’s understandable since there are thousands of credit scores out there and most people have no clue which ones they should pay attention to. When someone asks me which credit score they should keep track of, my response is always the same: The only score you should care about is the one a potential lender will use to assess your risk as a borrower. Ninety-nine percent of the time, that’s going to be your FICO score.
Since the final changes to the Risk-Based Pricing Rule just went into effect a little over a week ago, I haven’t had a chance to get a free peek at my FICO score just yet. However, I happen to have my eye on a new no annual fee credit card, so it’ll be interesting to see which credit score, if any, I receive after applying.
Have you applied for a financial product since the 21st of July? If so, share in the comments section who the lender was and if you received free copies of the credit scores they pulled when reviewing your application. I look forward to reading your comments.
Joshua Heckathorn runs Creditnet.com, a free resource for anyone who wants to learn more about credit and compare the best 0% interest credit cards online. He resides in Seattle and holds an MBA and B.S. in Finance.