Did You Know…Your rights to free credit scores?

Date: June 25, 2020

In last month’s Did You Know article, we identified numerous ways you can exercise your right to claim free credit reports from the national credit reporting companies (CRCs). This month, we’re going to focus on your right to obtain free credit scores. Although the list of places where you have the right to get a free credit score isn’t as extensive as the list for obtaining free credit reports, it’s still not that difficult to get your hands on that three-digit number at no cost.

First things first; let’s clearly define the term “credit score.” A credit score, according to the Fair Credit Reporting Act (FCRA), is a numeric value derived from a model used by someone who makes loans to predict the likelihood of certain credit behaviors, such as default. Practically speaking, a credit score is a three-digit number based on your credit report(s) that summarizes the level of credit risk you pose to a lender, credit card issuer, or some other service provider. A credit score is not the same thing as a credit report.

The FCRA confers the right to a free credit score or scores to consumers under only two scenarios. They are:

  1. When you apply for a mortgage loan: When you prequalify or apply for a mortgage loan, you have the right to what’s referred to as a Score Disclosure Notice. You have had the right to receive that notice since a 2003 amendment to the FCRA. This is an autopilot notice, which means your scores will be provided to you even if you haven’t asked for them. The notice will contain your three-digit score or scores, the key factors affecting your scores, and language explaining what a credit score is and why lenders often request them. The notice must be sent to you as soon as reasonably possible.

  2. When you are denied or adversely approved for credit based on a credit score: Since 2011, consumers who have been denied credit or approved but with less than favorable terms because of their credit score have had the right to a free copy of the score that was used by the lender in making its decision.

If you are denied credit based on your credit score, then you’re going to receive what’s formally referred to as a Notice of Adverse Action, although most people simply call them denial letters. This notice, which is also an autopilot notice, will contain several categories of information, including from what credit reporting company the lender pulled your credit report, the actual three-digit credit score used by the lender, and the score range of that credit score, which normally falls in the range of 300 to 850. The Adverse Action notice almost always comes in the mail.

If you are approved for credit but at less than favorable terms, then you’ve been “adversely approved” and have the right to see your credit score as well. The notice you’ll receive will either be the Risk-Based Pricing Notice or the Credit Score Disclosure Notice, depending on which notice your lender chooses to send. In either case, the notice will contain information about how lenders use credit scores, the actual three-digit score used by the lender, and the applicable score range.

The Risk-Based Pricing Notice and the Notice of Adverse Action must both contain information explaining why your scores weren’t higher. That information is formally known as a reason code, but is commonly referred to as a score factor or an adverse action code. You can learn much more about reason codes at www.ReasonCode.org.