New Bill Promotes Free Credit Scores to Expedite Debt Repayments

Provision in the Frank Wall Street Reform and Consumer Act (FACTA) Finally Allows People to Check Credit Scores Without Charge

credit scoresSince 2008, the United States of America has been dealing with a financial crisis the likes have which have not been seen since the Great Depression. A combination of massive unemployment in almost all sectors both public and private, totaling at around 16-20% (if you include those that are deleted from the labor force), plummeting prices in real estate, rising inflation, a devalued currency, and a skyrocketing federal deficit, has caused a slump which is expected to get much worse before it gets better. A primary issue facing the household sector is the growing number of defaulted debt.

The increasing rise in the amount of defaulted student, mortgage, credit, and business loans has significantly affected many Americans, especially the unemployed who are now having to deal with the inability to pay off debt, a decreased amount of disposable income to support their families (which results in application to social welfare programs), and a decrease in their credit scores, which further pushes them away from attempting to dig themselves out of their financial calamity.

To help curb the escalating crisis, President Obama signed in the Dodd-Frank Wall Street Reform and Consumer Protection Act on July 21st, 2010, which is tasked with reigning in the uncontrolled financial market, merging various financial regulatory agencies, and giving Americans more tools to help dig themselves out of the financial dump.

One such tool is a “minor” provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act which will now provide consumers free access to their actual credit scores. Previously, FICO scores were provided on a fee basis only. The Credit Reporting Agencies were making millions giving people “free” credit reports while charging a hefty sum for their scores.

That’s about to change. Section 1100F of the act requires issuers, lenders, landlords, utility providers and others companies that reject an applicant or take any adverse action as a result of the score to disclose it to the consumer.

Consumers will get the actual score used by the credit grantor to approve or deny the loan. This is key, because there are numerous scoring models used. (Known as industry-adjusted scoring). The scores the bureaus sell to consumers are often quite different than those received by credit grantor. For example, a score used for a credit card application is often higher than the one used for a mortgage app.

This new consumer bill is extremely important to consumers who want to repair their credit by referring to an accurate and cost free credit score. They will now have a much more accurate idea of how much they need to improve their scores to qualify. Credit Repair firms will also be able to make better judgments as to what services will best serve their clients.