MCLEAN, Va. (8/1/11)--Consumers turned down for a loan will now have the opportunity to find out why. As of July 21, lenders must give consumers a free copy of their credit score when they are rejected for a loan or approved for a higher-rate loan due to a low score (USA Today
July 21). The new law, a component of the Dodd-Frank Wall Street Reform and Consumer Protection Act, requires lenders to provide consumers with the credit score used to make the loan decision, and an explanation of that decision. The explanation must show how the credit score ranks nationally, and identify which factors negatively affected the score. Consumers can use this information to gain an understanding of how to improve a less-than-stellar credit score. If you need help raising your credit score, start with these suggestions from the Consumer Financial Protection Bureau, Washington, D.C.:
* Make timely payments. Paying all of your bills on time can boost your score. Ask creditors to assign you an easy-to-remember due date, and take advantage of automated bill pay services that may be available at your credit union. * Don’t max out your credit. Using too much of your available credit can bring down your score. That’s because scoring formulas calculate that consumers who use too much credit may struggle to pay it back. Aim to use 30% or less of your total credit limit. * Limit new accounts. Applying for or opening too many new lines of credit in a short period of time can ding your credit score. Avoid opening new credit accounts if you’re planning to take out an auto, mortgage, or other significant loan. And stay away from store credit cards, which also can lower your score. * Check your credit report. You can receive a free copy of your credit report from each of the three main consumer reporting agencies--Experian, Equifax, and TransUnion--every year. Stagger your requests to each agency throughout the year to stay as up-to-date as possible. Visit annualcreditreport.com to obtain your copy. * Look for errors. When you receive your credit report, examine it for mistakes that could be hurting your credit score. If you do find a problem, contact the consumer reporting agency and the creditor in question. Be sure to include documents and other evidence to support your claim. If the agency and the creditor find your claim to be valid, they’ll correct your report.
For more information, listen to “Does Your Credit Score Tell the Truth About You?” and watch the “Build Your Best Credit Score” video in the Home & Family Finance Resource Center