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:
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.