When You Can Get Your Credit Score for Free

Your credit score is a numerical calculation based on information from your credit report that supposedly determines your risk for default on loan or credit payments. All kinds of lenders and creditors use credit scores in their lending decisions. (Learn more about credit scores and credit reports.)

If you want to know what your credit score is, you can pay for it. Although whether it’s worthwhile to do so is questionable. In some situations, however, a creditor must provide you with a free credit score. This generally happens when the creditor relied upon your credit score in making a credit decision.

Here are the situations when you can get your credit score for free.

You Apply for a Residential Mortgage

If you apply for a loan on residential property and the lender uses a credit score, it must disclose:

your credit score
the range of possible scores under the scoring model used to generate your score
all the factors (up to four) that negatively affected your score, in order of importance
the date the score was generated, and
the name of the entity that provided the score (for example, Fair Isaac).

The lender must also give you a notice with contact information for the credit reporting agency that provided the score.

Lenders that evaluate loan applications using automated systems must disclose either the system’s score and the key factors that affected it or a score from a credit reporting agency.

A Creditor Takes an Adverse Action Against You

If a creditor used your score in making a credit decision, and the decision resulted in an adverse action against you, the creditor must disclose:

your credit score
your right to get a copy of your credit report
the range of possible credit scores
the key factors that adversely affected your credit score
the date the score was created,
and the name of the entity that provided the score or credit file on which the score was based.

What Is an “adverse action”?

An adverse action is when a creditor:

refuses to raise your credit limit
refuses to grant credit substantially as you requested
terminates your account
makes an unfavorable change in the terms of your account (but does not change the terms of all, or substantially all, of other consumer accounts of the same type), or
takes any action or makes any determination in connection with an application or transaction you initiate that is adverse to your interests.

A Creditor Charges You a Higher Interest Rate

If a creditor uses a consumer report in connection with deciding what regular annual percentage rate (APR) to charge you for new or existing credit, and then offers you a rate less favorable than the rate it offers approximately 40% of other consumers to whom it offered a similar type of credit, it must do the following:

inform you of that fact (that it is charging you more), or
reveal your credit score and how it compares to others (called a credit score notice).

If the credit you are requesting does not have an APR, the creditor must tell you whether the most important credit term in the contract differs for you than for others. For example, it might have to tell you that the utility service deposit it charges you is higher than what it charges others.

Exceptions or Limitations to this Rule

The creditor does not have to comply with the above notice requirements if:

it gave you credit on the terms you requested, or
it gave you an “adverse action” notice.

There are other times when these notice rules are limited. For example:

If the creditor sent a particular credit card offer only to customers with low credit scores, it does not have to tell you what credit card offers it makes to other groups of consumers.
The creditor only has to compare APR rates within a specific type of credit (such as student loans, new car loans, or variable rate home loans).
The creditor only has to compare the regular APRs, not other rates. So, it could make credit card offers with the same regular APR to a group of consumers, but offer some consumers a plan that has a different default rate than the default rate it applies to most consumers who make a late payment, and not have to tell you that.

Your State Requires Creditors to Disclose Your Credit Score

Some states require a creditor to disclose your credit score in certain sitautions. For example, under California law, if a car dealer gets your credit score in connection with your application for a vehicle loan or lease, the dealer must give you your score, information on the range of possible scores, and contact information for the credit reporting agency that supplied the score.

When in Doubt, Ask for Your Score and the Reasons for the Creditor’s Action or Decision

Because the rules regarding when creditors must provide your credit score (and sometimes credit report) are complicated, it is often difficult to know if you are entitled to a free credit report or credit score.

The best policy is to ask for more information whenever a creditor denies credit, offers credit terms less favorable than those you requested or think you deserve, reduces your credit limit, or cancels your credit card. In these circumstances, even if the creditor does not give you a notice or credit score, always ask:

for the creditor’s reasons for not providing credit on more favorable terms, reducing your credit limit , or canceling your credit
about the best rate and terms the creditor offers
how the terms the creditor offered you compare with terms it gave to other consumers
whether the creditor used your credit score in making its decision, and
for a free copy of your credit score and an explanation of the factors that were most important on your score.

The creditor may not agree to provide you with this information, but it doesn’t hurt to ask. And the creditor may be violating the law if it doesn’t give you the notice or credit score when required.

This is an excerpt from Credit Repair, by Margaret Reiter and Robin Leonard (Nolo).