If you’ve recently been denied when applying for credit, it’s now a whole lot easier to find out why.
Under final rules issued by the Federal Trade Commission and Federal Reserve Board to reflect the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act, there are a number of scenarios in which you will automatically get a free credit score.
The new rules kicked in July 21st.
Here are the scenarios:
- You apply for credit and are denied credit based on your credit score. You’ll get a letter, the score that was used, and information on how to get a free credit report too.
- You apply for credit and get approved with less than the best credit terms that have been given to other approved applicants (i.e. a higher APR). This is also known as Risk-Based Pricing.
- Your existing credit terms are changed. This can happen if you have an existing account with a credit card issuer and the APR is increased based on a poor credit score.
Also, keep in mind that you are also supposed to get your credit score when you apply for a mortgage loan (not new, but still good to know).
Here’s a couple of key things to keep in mind in light of this news:
- I’ve been reading that many creditors are deciding just to send out credit reports to everyone who applies for credit as an easy way to navigate the new rules. Definitely not a bad thing for consumers.
- You will be given the credit score that was actually used to make the final call – whether it’s your FICO score, VantageScore, Experian, TransUnion, or Equifax.
- Credit scores are ultimately just a score. It can help highlight why you might have been denied, but your actual credit report might have better insights as to what you might need to fix. Remember that you can get 3 free credit reports annually from annualcreditreport.com (the official government mandated site) to figure out what you need to do to improve your credit score. And Credit Karma offers free credit scores now.
- You can always get your free VantageScore from Credit Karma if you’d like – and it might be wise to do this BEFORE you are denied the next time you apply for credit (check out my Credit Karma review for more info.).