Credit Scores for Everyone

By Daniel Indiviglio

Update: Or not! My understanding of this amendment was based on this op-ed on Sen. Udall's website. Sadly, it looks like the lobbyists got to it before vote. Shortly after posting, I received an e-mail from a Udall spokesperson saying:

I did want to make sure you had the most updated language. The amendment actually gives consumers free access to their credit score if it is used against them in a financial transaction or adverse hiring decision. Although Senator Udall also continues to support language that would give consumers a free credit score with their credit report, that's not what the amendment would do. However, this updated version actually reaches far more people, so it's terrific news for consumers!

This is still better than past precedent, but also very disappointing. On some level, every credit decision is more adverse than it could be, since the terms could almost always be more beneficial to the consumer. But this now only applies if credit is denied or results in worse terms than anticipated. In any case, here's the original post, much of which is now a wish instead of reality:

Soon, you may be able to get your credit scores, for free. Monday evening, an amendment to the Senate's financial reform bill succeeded which would allow Americans free access to their credit scores along with their free annual credit reports. The measure, sponsored by Sen. Mark Udall (D-CO), passed by a simple voice vote. This move should boost transparency in the consumer credit market.

Up to now, many consumers had no way of knowing how the credit bureaus scored their creditworthiness, unless they paid a fee. This seems a strange notion, given how significant an input credit scores generally are for many lenders. By knowing your score, you may be more easily able to bargain for a better interest rate or loan terms.

Of course, the credit score still remains something of a black box. While some things are known about how various actions affect your score, the detail is unclear to consumers. The bill also doesn't do much to reform the inequality between a borrower's word and a lender's word when it comes to credit scoring. Right now, it's entirely based on what the lender says, while a borrower complaint is merely noted on the his or her report.

Still, this is a good first step. Knowing your score can also enhance your motivation for improving it, as you can check its progress each year. You can see how responsible borrower behavior increases your score, or how missing payments or defaulting on loans lowers it. Let's hope this measure gets through conference and makes it into the final bill.

This article available online at:

http://www.theatlantic.com/business/archive/2010/05/credit-scores-for-everyone/56864/