A free credit score could soon be in the mail. Starting July 21, lenders will be required to automatically provide credit scores to borrowers who are denied a loan or who aren't given the most desirable interest rate.
The rule is intended to inject some transparency into the decision-making process lenders use when determining the terms of a loan.
THE DETAILS
Each of the three credit bureaus - Equifax, Experian, and TransUnion - issues its own credit scores. This means that any potential borrower has several credit scores. Under the new rules, lenders will only be required to provide the score that was used to make the decision.
In addition, lenders will be required to indicate the range of possible scores so borrowers have a sense of where they stand.
Keep in mind that the rule doesn't guarantee everyone a free copy of their score. In fact, it's only in negative situations that borrowers can expect to learn their credit score. Also, don't make the mistake of confusing credit scores with credit reports; the rules on the two aren't the same.
With credit reports, everyone is already entitled to one free annual credit report from each of the credit bureaus. To request a free copy of your report from any of the three bureaus, go to www.annualcreditreport.com .
BACKGROUND
The new rule closes a loophole in a separate regulation that went into effect in January. That rule also required lenders to disclose if a borrower's credit hurt the terms of the loan. But lenders had a choice in how to provide that disclosure.
One option was to provide a copy of the credit score. But another option allowed lenders to simply provide a letter stating the borrower wasn't given the best rate because of his or her credit risk.