Consumers May Get More Access to Credit Reports

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Consumers who suffer an "adverse action" — in other words, denial of credit — may soon be able to get a copy of the exact same credit report used to turn them down. It’s all in a new amendment to the financial reform bill, and it’s coming your way soon.

Currently, consumers are eligible to receive one free credit report annually, as part of the Fair Credit Reporting Act. But the new legislation, the Fair Access to Credit Scores Act, sponsored by Sen. Mark Udall of Colorado, would give consumers who were denied credit, or lost a job due to lousy credit, a copy of the credit report free of charge.

The amendment is part of the Wall Street financial reform bill, which is scheduled for a final vote this week on Capitol Hill. If it passes, consumers turned down for credit will be able to get their credit reports either from the credit report company’s Web site, or via a written request to the company — usually that’s either Experian (Stock Quote: EXPN), Trans Union or Equifax (Stock Quote: EFX).

As usual, there are two sides to any new legislation, and financial reform is no exception.

For his part, Udall says the legislation underscores the need for transparency of credit scores. Says Udall, “Credit scores are critical for American consumers, especially in a struggling economy. Higher credit scores often mean lower interest payments for credit cards, automobiles and home mortgages. Consumers who have taken advantage of their one free credit report per year, are often surprised to find out it does not include their actual credit score.”

The importance of knowing what’s in your credit report is doubled when you’ve been rejected for credit. No doubt about it, being turned down for credit is high up on the list of unpleasant experiences — right there between a colon exam and rooting for the Mets.

But Udall says that consumers can at least learn from the experience, and plan their finances accordingly once they know where their credit problems lie. “The ability to obtain a free credit score will provide a more complete picture of a consumer’s creditworthiness, and inform consumers if they need to take action to improve their score,” he adds. “ Providing access to a free credit score will increase financial transparency, help consumers make better financial decisions, and lay a more solid financial foundation for millions of Americans.”

On the other side of the coin, credit scoring firms go to a lot of trouble to gather consumers’ personal financial data, and aren’t happy about having to give away all that expertise and hard work for free. Even Udall, in his speech on the Senate floor announcing the amendment, admits regular credit report access is worth $200 a year to such firms.

Perhaps that’s why Equifax is rushing out a $4.95 per-month, “full access” to all three credit reporting agencies. That offer ends June 3. By then, Congress may have passed a financial reform bill that includes the amendment, and Equifax, along with Experian and Transunion, will take a financial hit from having to release credit reports to consumers who’ve been rejected for credit.

Those consumers, through the law of the land, will be able to get access to those credit reports for free. While the legislation is no doubt a good deal for consumers, credit reporting agencies won’t likely appreciate Uncle Sam giving away their work for free.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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