New credit score disclosure rules issued by the Federal Reserve Board and the Federal Trade Commission (in association with the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act) go into effect today requiring lenders to provide borrowers with their credit scores if they are denied credit or offered less favorable terms because of those scores.
- If a consumer’s application or request for credit is denied and the lender uses a credit report to help make the decision, an adverse action notice is required to be provided to the declined applicant. This isn’t new and has been an industry requirement for many years. What is new —effective July 21st — is the requirement for lenders to now include the credit score used by the lender when issuing an adverse action notification.
For more on credit score disclosures within risk-based pricing notifications, read The Politics of the Credit Score.
- As of January 2011, lenders who use credit bureau information as a factor in risk-based pricing practices (granting tiered or materially different credit pricing based on the applicant’s level of projected risk) are generally required to provide either a risk-based pricing notice, or a credit score disclosure notice to all applicants. This rule did not require the lender to include a credit score in the risk-based pricing option. What is new —effective July 21st —a credit score (if obtained) is now required to be included whether the lender opts to meet compliance with either a “risk-based pricing notice” or a “credit score disclosure” notice.
These changes are helping to increase consumer exposure to the information lenders use to evaluate their requests for credit. Consumers can hopefully benefit from this exposure and take steps to improve their credit rating in order to increase their access to more affordable credit in the future.
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