Although you may be a pillar of the Denver homeowner community, admired by your colleagues, and loved by friends and family, you may still have a mediocre credit score. This, of course, means you might not be able to get a decent interest rate on a mortgage, which is worrisome to a lot of people. What's even more troubling is the secrecy surrounding the entire credit-scoring process.
A federal law enacted in 2003 requires the three credit bureaus to provide consumers with a free copy of their credit reports each year, but they’re not required to include your credit score. You usually 
have to pay to get your score, and even then, it’s unclear whether the score you’ve purchased is the one lenders will use when you apply for a loan.
Thing are changing! Beginning this year, free and relevant credit scores will become much more widely available. This is happening for two reasons. First, provisions of the law that requires credit bureaus to give you a free annual report (the 2003 Fair and Accurate Credit Transactions Act) imposes new disclosure obligations on lenders. This could encourage more lenders to provide customers with a free credit score. Under “risk-based pricing” provisions that took effect on January 1, lenders are required to send a notice to all applicants who receive a loan with a rate that's higher than the best rate available. The notice must explain how the applicant can get a free credit report.
Second, a provision of the Dodd-Frank financial reform law (which takes effect on July 21) will require lenders to provide borrowers with a free credit score whenever they’re either turned down for a loan, or charged a higher rate than the best rate available. According to John Ulzheimer, president of consumer education for SmartCredit.com, this “adverse action” requirement will also extend to landlords, utilities, and other entities that use credit scores.
The end result is that millions of consumers will see the credit score that lenders, insurers, and others use to gauge the likelihood they’ll repay a loan. “This will be an eye-opening experience for consumers,” Ulzheimer says. “They’ll be able to conclude how far they have to go before they truly have elite credit scores.”
Here are a few tips for consumers who want to improve their score:
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Contact the lender that sent you the score. Ask the lender what score you would have needed to get the best deal, Ulzheimer says. “If they tell you you’re 20 points away, you’ll realize you’re not far off from the goal,” he says. “If it’s 70 points, you’ll realize you’ve got some work to do.”
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Order your free credit reports. Your credit score is based on information in one or more of your credit reports, so it’s important to know what those reports contain. A survey by the National Foundation for Credit Counseling found that nearly two-thirds of Americans hadn’t ordered a copy of their free credit report in the previous 12 months.
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Get educated on what goes into a credit score. FICO has launched an educational website, scoreinfo.org, that explains the factors that influence a FICO score.
While these changes will put credit scores in the hands of a lot more people, some consumers should still consider buying a credit score, Ulzheimer says. Even after the Dodd-Frank provisions take effect, you’ll have to wait until after you’ve applied for a loan to get a credit score, he notes. Buying your score several months before making a major purchase, such as a house or a car, will give you an opportunity to improve it before you apply for a loan.
Now is the perfect time to move into a new Denver area home, and the Bandy Team of real estate experts can help you find your perfect new place. We can provide all the help you need to make an easy transition to a charming home in Saddle Rock, terrific housing in Fitzsimons, or another Denver community that's just right for you.
Marianne Bandy
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