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 and all of the factors (up to four; five if one of the factors is the number of inquiries) that negatively affected your score.
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 that include information in addition to what’s in a credit file or that get a credit score from a company that is not a credit reporting agency, may provide a credit score from a credit reporting agency instead of the score they actually used.
A User of Your Credit Report 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 includes when a creditor:
- refuses to raise your credit limit
- refuses to grant credit substantially as you requested
- terminates your account, or
- 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).
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 (or insurer, government agency, employer, landlord, or other entity using your credit score) 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 a 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 or other user may not agree to provide you with this information, but it doesn’t hurt to ask. And those who use your credit score may be violating the law if they don't give you the notice or credit score when required.
This is an excerpt from Credit Repair, by Margaret Reiter and Robin Leonard (Nolo).