What your credit score disclosure should reveal
We've recently covered why you might be turned down for credit and what you can do about it, but I'd like to touch on what would-be lenders have to share if you are rejected.
New rules on what they have to tell you went into effect this summer, courtesy of the sweeping Dodd-Frank Wall Street Reform and Consumer Protection Act.
These rules require lenders to justify their decision to turn you down or refuse to give you the lowest possible interest rate through what's called an "adverse action notice."
They must also say whether that denial is based wholly or in part on information in your credit report.
But that’s not all you’re entitled to receive.
Although the content of the notice can vary by lender, it should include:
The credit score used in the adverse decision. This is perhaps the most useful change as it allows you to see exactly what your score was at the time of the denial or adverse credit action.
The range of possible scores under the credit scoring model used. Also helpful, this lets you see where your score falls in the range to determine how poor -- or good -- it actually is.
All key factors that adversely affected the credit score. The rules mandate you receive all of the five factors (when applicable) -- payment history, debt, credit history, new credit inquiries and the mix of your credit.
The date on which the credit score was created.
The name of the credit reporting agency that provided the score.
Information on where you can get a free copy of your credit report within 60 days and a right to dispute the accuracy or completeness of the information reported.
FICO provides more information about credit score disclosures, including a sample action notice, on its website (www.scoreinfo.org).
Hopefully you won’t be turned down for credit, but if you are, at least you’ll have a much clearer picture of why you were turned down that you would have just a few months ago.