Consumer's Guide to Credit Reports and Credit Scores

Attention is focused on new financial regulations enacted as part of the Dodd-Frank Act.

Earlier this year, the Federal Trade Commission announced final rules requiring creditors to provide consumers' with a "risk-based pricing notice" when granting credit on less favorable terms than it provides other consumers.

To assist consumer understanding of these new rules, the U.S. Federal Reserve has unveiled an online guide to credit reports.

This straight-forward guide includes information on credit reports and credit scores, how they are utilized in credit granting decisions, unsolicited credit offers, credit repair and how to protect your personal information from fraud.

Released on Wednesday, the "Consumer's Guide to Credit Reports and Credit Scores" is meant to complement consumer-protection laws that Congress enacted several years ago.

Under the Fair and Accurate Credit Transactions Act of 2003, lenders - starting in January - will be required to tell consumers when adverse information on their credit reports is going to result in higher rates and fees for mortgages, credit cards and other loans.

In today's tough economy, a strong FICO (Fair Isaac) credit score is more important than ever. Studies show that approximately 78 percent of credit profiles in the United States contain some sort of error or omission materially impacting credit worthiness.

As creditors tend to offer favorable terms to consumers with good credit histories and more costly credit to those with poor credit histories, the guide is intended to assist them in disputing negative and/or inaccurate information prior to making an application for credit or employment.

Under the "risk-based pricing" rules, consumers hit with the less favorable credit terms can also obtain a free credit report to check its accuracy.

Under the Fair Credit Reporting Act, as modified by the Fair and Accurate Credit Transactions Act, consumers are entitled to a free copy of their credit report under a narrow set of circumstances.

If you have been denied credit, goods, benefits, services, insurance, and/or employment, the credit reporting agencies of Equifax, Experian and Trans Union are statutorily mandated to provide a copy free of charge.

Absent these exceptions, consumers are entitled to one free "annual credit report" per year. Credit scores are not included with any of the "free credit reports" provided by the national credit reporting agencies.

Equifax can be contacted at (800) 685-1111 or www.Equifax.com; Experian can be contacted at (888) 397-3742 or www.Experian.com; and Trans Union can be contacted at (800) 916-8800 or www.TransUnion.com.

Be sure to prompt that you were denied credit when requested to do so.

For your free annual credit report, contact the central source at 877-FACT-ACT (877-322-8228) or www.AnnualCreditReport.com. Follow the voice prompts and obtain your credit report for review.

Consumer advocates say additional work is needed to address concerns about credit reports and credit scores. "The main problem is really with credit reports - they're just plagued with inaccuracies," said National Consumer Law Center attorney Lauren Saunders. "It's a nightmare for consumers to get anything fixed."

Saunders said she is expecting the FTC and the new Consumer Financial Protection Bureau, the first agency to be charged with protecting consumers from abusive financial products, to take more action in addressing consumer concerns about credit reports.

Acting as a primer to the uneducated individual, the "Consumer's Guide to Credit Reports and Credit Scores" advises what they should do if they find errors. In a three-step process, ordering credit reports and reviewing them for errors or inaccuracies; contacting the credit reporting agencies to enter a formal dispute; and, waiting for a response from the CRA's and/or creditors is explained.

To learn more about the Consumer's Guide to Credit Reports and Credit Scores, visit www.federalreserve.gov/creditreports. To review Bill Lewis' entire consumer protection series at the Highlands Today, visit www.williamlewis.us.

Source:  The Credit Report with Bill Lewis - Highlands Today, an edition of the Tampa Tribune - Media General Group.  http://www2.highlandstoday.com/content/2010/nov/14/guide-credit-reports-credit-scores/

William E. Lewis Jr., is a credit repair expert with Credit Restoration Consultants and host of "The Credit Report with Bill Lewis" on AM 1470 WWNN, a daily forum for business and financial news, politics, economic trends, and cutting edge issues.