The Credit Score Politics and the Expected Alterations

To Explain More….

Suppose a lender rejects the request of a credit applicant and if the decision is based on the credit bureau report of the applicant, the lender has to inform the consumer that the decision is ruled by the Law of Equal Credit Opportunity Act (BEAC) and Fair Credit Reporting Act (FCRA).

Communication is to be made with mention of the lender’s details like address and name, description of the exact adverse actions as well as the particular reasons for taking those adverse actions along with the ECOA notice. It even includes :

• A statement proclaiming that the credit information had been used for taking an adverse action

• The telephone number and address of the credit-report firm

• A statement that the applicant/consumer is entitled to receive a copy of his/her credit report and the right to question/disagree on the accuracy of the data report

• A proclamation that credit bureau is not responsible and is unable to provide an explanation or reason for the said credit decision.

Presently, it is not mandatory upon the lender to disclose credit scores in the notification of the negative action. It will probably change this year.

There has been an amendment to the FCRA by the Dodd-Frank Act. Accordingly, the lender has to offer these information to the consumer:

• The credit score made use of for undertaking the adverse step

• Variety of probable scores with the model

• The reasons that led to a low credit score would be ranked according to order of importance

• The credit-reporting agency name that gave the credit score

• The date of creation of the credit score

The new regulations would probably assist consumers in getting an in-depth analysis of why their credit scores have been low and would help them to work towards improvement of the same. Washington has witnessed a flurry of activities in the recent times with regard to proposing, reviewing, and adopting rules for greater access to consumers to their credit scores – particularly those scores which lenders use during setting loan conditions and on the basis of which, they take a decision to grant or refuse a consumer credit application.

Overall, this is certainly positive news, as consumers will have more transparency in the process of credit assessment, and access to the current credit rating of the lender. They will have a clear-cut understanding of why their credit application has been accepted or refused.

As with every regulation, the rules and details are being decided upon. Additionally, you can get confused with such rules of various government agencies and proposed standards, as proved by the reporting requirements of proposed credit scores that were released a few days back by the FTC and the Federal Reserve. The proposed regulations are related to the credit score disclosure in the adverse action context and notification of price-based risks.

How will the Consumers be Affected by the Regulations

On rejection, the creditor will inform you – the consumer, and submit an explanation/reason of why you were rejected for the loan application or service. You will also get access to a complimentary credit report copy from the specific credit-reporting agency the lenders referred to.