I assume we all know that your credit score determines your interest rate on a loan or whether you get a loan or not. In the past this score has always been a secret and little if no explanation given to the applicant on the reason for being denied credit. Starting today this all changes with provision in the Dodd-Frank financial reform.

How do things change for consumer? It means lenders will be required to supply the applicants credit score upon any of the following;

1.  Reject an applicant for a loan; they must provide reason why they are denied

2. Approve a loan but at a higher rate than their best customers, and explain why they are charging a higher rate

3. They must provide which score they used to make decision about loan and explain the factors that adversely affected your score.

Mark Green, CEO of FICO says about half of about 1 billion annual credit applications will fall under one of the 2 categories. Borrowers will be shocked to find out they are not being offered the same rates as the lenders best customers. It will encourage consumers to shop around for better rates and to improve their scores for the future.

In 2003 a federal law required the 3 major credit bureaus to provide consumers with their free annual reports but not with a “credit score.” The Dood-Frank reform does not change the 2003 Federal Law however a consumer can purchase their credit score when ordering their free credit reports. It is important to note that these credit scores are not the same scores used by the lenders, so called “educational score.

These changes will be great for consumers, especially in these difficult financial times. As a Real Estate Broker working with buyers and sellers daily we are experiencing overly tight lending standards compared to years past. I am not saying banks should make “fog the mirror” or sketchy loans but they do need to loosen their standards to help provide more homeownership.

“Until Next Time”