The Federal Trade Commission (FTC) and the Federal Reserve Board (FRB) have implemented new rules for consumer credit, wherein said consumers will receive a free credit score should the bank use it as a basis for various credit-related decisions.
The FTC and RTC believe that consumers must have a fair explanation as to why their applications for credit have been denied or why their existing terms are suddenly modified.
Starting July 21, 2011, all banks and lending institutions that hand out loans must issue a free credit score to individuals when they use that credit score to:
- Deny credit
- Revoke credit
- Set credit terms
- Change existing credit terms
The FTC and RTC also compel lenders to disclose:
- The date when the credit score was created
- From where or whom the score was provided
- The range of possible scores under the credit score’s model
- Up to four factors that lowered credit score OR up to five factors that lowered credit score of the number of credit inquiries affects credit score
The latter list will allow consumers to not only know what their credit score is, but to understand why they have that score in the first place.