Senate Approves Rule Authorizing Free Credit Scores

By:
Peter King | May 18, 2010

An amendment adopted by the U.S. Senate on Monday would give consumers free access to their credit scores – but only in limited situations.

The rule, sponsored by Sen. Mark Udall (D-Colo.), was added to legislation establishing new regulations on Wall Street financial firms, which the Senate is currently debating. It would allow consumers to obtain their credit scores for no charge from the three major credit reporting firms – but only if those scores had been used against them in denying them credit or in a hiring decision.
 
Presently, consumers are entitled to obtain free copies of their credit report once a year from each of the three major credit reporting companies – Equifax, Experion and Transunion. However, those reports only contain the details of the consumer’s credit history – their record of making payments on mortgages, credit cards and other debt. To obtain their credit scores – which are what lenders use in making determinations of whether to extend credit and what interest rates to charge – consumers presently must pay a fee.
 
Credit scores are increasingly used not only by lenders in deciding whether to extend credit, but in other ways as well. Employers are increasingly looking to credit scores in making hiring decisions, assuming that a higher score is an indication of how well a job candidate manages his or her personal life, and thereby is a reflection of character.
 
The rule would require that consumers automatically be given their credit score if they are turned down for a loan or purchase, pay a higher interest rate on a loan or receive unfavorable terms on a credit card, or are not hired for a job due to their credit rating.
 
"For too long, consumers have been at a disadvantage because banks and lenders use these credit scores against them while they have no idea what their actual score is," Sen. Udall said. "A person's credit score affects the terms of home loans, their ability to purchase a car, rent an apartment or get basic utilities. It's simply not fair for lenders to have access to a consumer's all-important credit score without the consumer being given free access to it.”
 
The amendment has bipartisan support, with three Republican senators among its 10 cosponsors. If passed along with the Wall Street reforms, it would still have to be included with the House version of the same legislation before it could become law.

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