Free Access to Credit Scores Act
Free Access to Credit Scores Act — Consumers already have the ability to request their free credit report once a year, but a credit report does not include your credit score. These two items are often confused to be the same, which they are not. You generally must pay to see your credit score — it’s a three-digit grade that predicts how risky you are to a lender.
Earlier this month, bills were introduced in the House and Senate to allow all consumers free access to credit scores once a year. The Free Access to Credit Scores Act was authored by U.S. Sen. Bernie Sanders of Vermont and U.S. Rep. Steve Cohen of Tennessee.
Several consumer groups support passage of the Act including the Consumers Union. “Knowing your credit score is essential to managing your finances,” offers Pamela Banks, senior policy counsel for Consumers Union. Many consumers unknowingly elect to pay to receive their credit scores and only find out later that “the scores you buy may not even be the ones your lenders use,” says Banks.
The FICO score, created by Fair Isaac and reported on a scale of 300 to 850, is the most widely used. The three major credit bureaus, Experian, Equifax and TransUnion, developed a competing score, the Vantage Score, which uses a scale of 501 to 990, making it hard to compare with the FICO score.
In a recent study evaluating the differences between FICO and Vantage scores, the Consumer Financial Protection Bureau found huge discrepancies between scores provided to consumers and those sold to lenders.
The agency found almost a quarter of all consumers in their study of 200,000 cases would see a score that was one tier off from what a lender would see. For example: a consumer purchased score in the “excellent” range of 740-plus would be displayed to a lender as only a “good” score in the 680-740 range. Three percent of all scores analyzed had even greater variations.
Credit scores can be affected negatively by inaccuracies reported on credit reports such as wrong or outdated personal information, an incorrect payment status or a remedied delinquency not being reported.
A future home-buyer concerned about credit should “check with his or her lender six months before they want to purchase a home,” says mortgage banker, Tony Grafals, with Paramount Mortgage in St. Louis, Missouri.
If there are any credit issues on your report, or your score is not where you think it should be, you’ll want to find out sooner, rather than later. “That will give you ample time to fix any errors on your credit report,” offers Grafals.
If you do not know your credit score, you might find yourself spending money to try and make a purchase only to find out later that you cannot qualify for a loan.