Attention is focused on new financial regulations enacted as part of the Dodd-Frank Act. Earlier this year, the Federal Trade Commission announced final rules requiring creditors to provide consumers’ with a “risk-based pricing notice” when granting credit on less favorable terms than it provides other consumers.
To assist consumer understanding of these new rules, the U.S. Federal Reserve has unveiled an online guide to credit reports. This straight-forward guide includes information on credit reports and credit scores, how they are utilized in credit granting decisions, unsolicited credit offers, credit repair, and how to protect your personal information from fraud.
Released on Wednesday, the Consumer’s Guide to Credit Reports and Credit Scores is meant to complement consumer protection laws that Congress enacted several years ago. Under the Fair and Accurate Credit Transactions Act of 2003, lenders – starting in January – will be required to tell consumers when adverse information on their credit report is going to result in higher rates and fees for mortgages, credit cards and other loans.
In today’s economy, a strong FICO (Fair Isaac) credit score is more important than ever. Studies show that approximately 78 percent of credit profiles in the United States contain some sort of error or omission materially impacting credit worthiness.
As creditors tend to offer favorable terms to consumers with good credit histories and more costly credit to those with poor credit histories, the guide is intended to assist consumers in disputing negative or inaccurate information prior to making an application for credit or employment.
Under the “risk-based pricing” rules, consumers hit with the less favorable credit terms can also obtain a free credit report to check its accuracy.
For now, at least the Fed’s “Consumer’s Guide to Credit Reports and Credit Scores” tells consumers what they should do if they find errors: Contact the credit bureau, formally dispute any mistakes and then wait for the credit bureau to investigate, which usually takes 30 days.
Under the Fair Credit Reporting Act, as modified by the Fair and Accurate Credit Transactions Act, consumers are entitled to a free copy of their credit report under a narrow set of circumstances. If you have been denied credit, goods, benefits, services, insurance, and/or employment, the credit reporting agencies of Equifax, Experian and Trans Union are statutorily mandated to provide a copy free of charge. Absent these exceptions, consumers are entitled to one free “annual credit report” per year. Credit scores are not included with any of the “free credit reports” provided by the national credit reporting agencies.
Equifax can be contacted at (800) 685-1111 or www.Equifax.com; Experian can be contacted at (888) 397-3742 or www.Experian.com; and Trans Union can be contacted at (800) 916-8800 or www.TransUnion.com.
For your free annual credit report, contact the central source at 877-FACT-ACT (877-322-8228) or www.AnnualCreditReport.com. Follow the voice prompts and obtain your credit report for review.
Still, consumer advocates say a lot more work needs to be done to address consumer concerns about credit scores and credit reports, pointing out that once a consumer finds errors on a credit report, it is hard to correct them.
“The main problem is really with credit reports—they’re just plagued with inaccuracies,” said National Consumer Law Center attorney Lauren Saunders. “It’s a nightmare for consumers to get anything fixed.”
Ms. Saunders said she is expecting the new Consumer Financial Protection Bureau, the first agency to be charged with protecting consumers from abusive financial products, and the FTC to take more action to address consumer concerns about credit scores.
To learn more about the Consumer’s Guide to Credit Reports and Credit Scores, visit www.federalreserve.gov/creditreports. To review Bill Lewis’ entire consumer protection series, visit: www.williamlewis.us.
Bill Lewis – Radio talk show host, Starbucks connoisseur, social media whiz, political consultant, identity theft expert, columnist, philanthropist and his kids Dad.
As a nationally recognized credit repair and ID theft expert, Bill Lewis is principal of William E. Lewis Jr. & Associates, a solutions based professional consulting firm specializing in the discriminating individual, business or governmental entity.