The Federal Trade Commission and the Fed Reserve have finalized the rules that will help in making things easier for the US consumers and they will be able to obtain their credit scores for free from the lenders.
These new rules basically come from the Dodd-Frank financial reforms that were passed by the Congress last year. Now, banks and the others who use the consumer’s credit scores will have to disclose these scores to the consumers, especially if the scores are used while setting the credit terms. This will help give consumers a better insight into how the lenders view their credit scores.
The Consumer Financial Protection Bureau will now act as the consumer watchdog and will have absolute authority while enforcing these credit score disclosure rules after July 21.
Sometime this month, the bureau will also release a study that is also in line with the Dodd-Frank reforms. This study will examine if the credit scores that are bought by the consumers are of any use at all and if they compare with the scores used by lenders. Consumer groups are also hoping that the consumer bureau will take adequate steps to make it simpler for consumers to report errors on their credit reports.
Although they have pushed for changes in the draft, consumer advocates have welcomed the moves made by FTC and Fed to disclose the credit scores to the consumers. These disclosures will include credit scores as well as other related information on mortgages, auto loans, and credit cards. This will help in promoting accountability, simplicity, fairness, as well as transparency, stated Appleseed which is a network of public interest groups.
Lenders determine the borrower’s creditworthiness by looking into their credit reports. Any negative information or low scores on their credit reports would mean the consumer will be charged a higher rate of interest.
As per the current rules, lenders should disclose the consumer’s credit scores as well as related information in the notices to the consumers if the credit score is used to set the credit terms and even when consumers are denied credit.
John Ulzheimer, who is the President of consumer education from SmartCredit stated in an interview that these new regulations will not only enable consumers to see their credit scores but it would also help them get a better understanding of how the banks and financial institutions make their lending decisions. He also stated that these new rules would empower consumers and they will have a better understanding of the whole concept.
