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SALT LAKE CITY — Enacted last year as part of the Dodd-Frank Act, attention is focused on new financial regulations announced by the Federal Trade Commission requiring consumers to be provided with a "risk-based pricing notice" when receiving credit on less favorable terms than other consumers.
As an aid to understanding these new rules, the Federal Reserve Board unveiled an online guide with information on credit reports and credit scores and how they are utilized in credit granting decisions. The guide also includes information on unsolicited credit offers, credit repair, and how to protect your personal identification information from fraudsters.
The “Consum er’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 are required to tell consumers when adverse information on their credit reports is going to result in higher rates and fees for mortgages, credit cards and other credit transactions.
Studies show that approximately 78 percent of credit profiles in the United States contain some sort of error or omission materially impacting credit worthiness.
In today's tough 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 typically offer more favorable terms to consumers with high credit scores and more costly credit to those with poor credit histories, the guide is intended to assist them in disputing negative or inaccurate information prior to making an application for credit.
Under the "risk-based pricing" rules, consumers hit with less favorable credit terms can also obtain a free credit report to check it for accuracy.
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 or employment, the credit reporting agencies of Equifax, Experian and Trans Union are statutorily mandated to provide a copy free of charge.
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. Be sure to state that you were denied credit when requested to do so.
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.
For your free annual credit report, contact the central source at 877-FACT-ACT (877-322-8228) or www.annualcredit report.com. Follow the voice prompts to obtain your credit report for review.
Consumer advocates say additional work is needed to address concerns about erroneous credit reports and low credit scores. "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."
The main problem is really with credit reports — they're just plagued with inaccuracies. It's a nightmare for consumers to get anything fixed.
–- Lauren Saunders, National Consumer Law Center attorney
Saunders said she is expecting the FTC and the Consumer Financial Protection Bureau to take more action in addressing consumer concerns about credit reports. The CFPB is the first governmental agency to be charged with protecting consumers from abusive financial products.
Acting as a primer to an uneducated consumer, the "Consum er's Guide to Credit Reports and Credit Scores" advises what they should do when they find credit reporting errors. The best course of action is a three- step process: ordering credit reports and reviewing them for errors or inaccuracies, contacting the credit reporting agencies to enter a formal dispute, and waiting for a response from the CRA’s and/or creditors, all fully explained within the guide.
To learn more about the Consumer’s Guide to Credit Reports and Credit Scores, visit www.federalreserve.gov/creditreports.
Bill Lewis is the principal of William E. Lewis Jr. & Associates and host of "The Credit Report with Bill Lewis" — a daily forum for business and financial news, politics, economic trends and issues on AM 740 WSBR in south Florida.
