Colorado Senator Takes One For The Team And Pushes For Free Credit Score Disclosure To Be Made Available To All Consumers.
By: Shonnie Fischer
In 2003 FACTA (The Fair and Accurate Credit Transactions Act) amended the Fair Credit Reporting Act mandating that each consumer be entitled to receive one free copy of their credit report from all three of the consumer reporting agencies on an annual basis. However, the free credit report mandate does not require the credit bureaus to provide (nor does it entitle) a consumer to receive their credit scores for free in conjunction with receiving their free credit report. Traditionally, credit scores have been something that consumers have to pay a fee for in order to obtain them whether going through a financial institution or obtaining their credit report online.
Additionally, FACTA also mandated in section 609, that mortgage lenders had to provide a copy of the consumer's score as part of the homeowner’s disclosure notice. Most lenders were complying and providing this notice as part of the closing documentation the homebuyer received at the time of closing. Therefore, homebuyers have been afforded access to their FICO™ scores since 2003. Now, thanks to a Senator from Colorado, more consumers may soon have free access to their scores outside of purchasing or refinancing a real estate transaction.
Mark Udall (D-Colorado) has proposed the Fair Access to Credit Scores Act, A.K.A. FACS Act. The FACS Act would amend section 615 of the Fair Credit Reporting Act to require the disclosure of credit scores by the lender as part of their adverse action requirements. This means that if you are declined financing by a lender, insurance company or any other company that relies on credit worthiness and/or credit scores as part of their underwriting protocol, you will receive a copy of the scores used to make their decision. Even better, if you are approved but at a disadvantaged interest rate or insurance premium, you will still be entitled to receive a copy of the scores used to make that determination by the lending and/or other institution.
This would certainly serve to accomplish a number of things that we as consumers have been missing and longing for for quite some time.
FICO™ Scores Based On Experian Data - On February 14th, 2009, Experian and FICO™ officially parted ways and no longer have a myFICO.com partnership. That little Valentine's Day present officially prevented FICO™ from selling credit reports and FICO™ scores based on Experian’s data to consumers. Consumers still have access to their FICO™ scores based on TransUnion and Equifax data from myFICO.com. Since Senator Udall's amendment does not leave it up to the credit bureaus to present you with an irrelevant VantageScore or PLUS score (which are alternate proprietary scoring systems), it seems as if we will again soon have access to our Experian FICO™ scores as long as there is an adverse action taken by a lender or insurance company who used an Experian credit report in the decision making process.
FICO™ Industry Option Scores - FICO™ builds a variety of semi-customized credit bureau risk scores called industry option score cards. These are specialized scoring model systems for specific types of lending such as bank card, installment, personal finance, auto and mortgage financing. Prior to this amendment, these scores have never been available for sale to consumers, none the less FOR FREE!
Senator Udall's amendment will require the lender or other provider who utilizes the credit report and scores to give you the actual score they used if any type of adverse action relating to applying for credit or insurance is issued. Therefore, if the lender or other agency specifically used any of the FICO™ scores to make their decision, then for the first time ever you will get what nobody has ever gotten before which is disclosure of the actual FICO™ scores used.
No More Generational Score Confusion - FICO scores, like Windows™ software, are rebuilt periodically to take advantage of advancements in technology, newer data samples and changes in the predictive value of credit file characteristics. If all of this sounds like empirical black magic don't worry, this is actually much more simple than how it actually sounds. Because of these periodic redevelopments there are actually many different versions of the FICO™ scoring models still in use by lenders today. Since some of lenders are large customers of the credit bureaus it is unlikely that the bureaus will strong arm them into converting to newer versions until they voluntarily choose to do so. What this has caused is confusion over what scores are actually being sold to consumers. For example, my FICO™ score based on Equifax’s data might be 780 under one version, 797 on another model or version and 772 on another depending on the generation and/or version of the FICO™ system being used by the creditor. The one the lender purchases might not be the same one that a consumer can buy. Senator Udall's amendment eliminates this issue because whatever score version the lender is buying is the one the consumer is going to receive.
No Bait And Switch Scores - Currently, there are four credit scoring systems prevalent in the direct-to-consumer market today. They are the FICO™ score, the VantageScore™, the PLUS Score™ and the TransRisk Score™. Those of you who have purchased your scores online or got them for free in exchange for your credit card information, may not be aware of which scoring system you are actually given. Most people want the actual score that the majority of lenders use, which is the FICO™ score. The problem is that Experian and TransUnion would rather you purchase their scores , whether it be the Vantage, Plus or TransRisk scores, rather than the FICO™ scores. Additionally, another consumer tidbit for your information, is that PLUS Scores™ are not even sold to lenders. Futher, VantageScores™ and TransRisk Scores™ do not have enough combined market share to fill a row boat. Yet, you're actually more likely to end up with those scores when you go hunting online than you are to receive your actual FICO™ scores. It is the FICO™ scores consumers are in most need of obtaining when seeking to measure credit worthiness from a credit scoring standpoint.
The Udall amendment does not involve the credit bureaus who are not a party to the score disclosure requirements. Senator Udall either got lucky or did his homework and figured that the bureaus (one in particular) were licking their chops and getting ready to take advantage of the free credit score requirements like they (one in particular - again not naming names) have taken advantage of the free credit report requirements in the past. I mean, why has Experian completely changed their marketing efforts to push free credit scores from free credit reports? It doesn't take a credit genius to figure that one out.
No Real Complaining By The Bureaus Or FICO INC.™ - Behind closed doors the bureaus probably don't like this new law however, since the scores being given away have already been purchased by a lender they can not really complain too loudly. FICO™ on the other hand should be very happy with this law for a couple of reasons. First, the scores have been purchased so they will get their piece of the action via financial gain. Second, the majority of scores that will be given away will be in fact the true FICO™ scores which is a great branding opportunity for them. It really eliminates any chance that competing scoring models will be able to forge ahead and take advantage of this new rule, therefore being able to steal market share from FICO Inc.™ will be nearly impossible.
The Udall amendment passed the Senate on May 17, 2010. Now it has to be passed in the House and survive the conference process. Keep your fingers crossed that the amendment is not modified or taken out as this truly is one for the consumer. Stay tuned!!
Thank you for reading this months issue of the RE Credit Repair, LLC newsletter. We hope you have enjoyed the information and certainly welcome any questions, comments and/or assistance with any additional credit repair, management or education needs you may have.
