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A Step Forward on Credit Transparency

Amy Traub

Credit reports and scores are made up entirely of information about individual consumers -- data that’s collected without our permission or even necessarily our knowledge -- but we don’t have free access to this information. Under federal law, consumers get one free credit report a year and must pay to see a credit score. Even then, the credit score we’ve paid for is often an “educational score” that may differ quite a bit  from the number lenders use to make loan decisions – with potentially serious consequences.

In our report “Discrediting America”  Demos argued that this state of affairs tilts the marketplace unfairly toward lenders and the credit reporting industry, putting consumers at a disadvantage. We called for consumers to be given free access to the actual credit scores used to make lending decisions.

Today, we are a step closer. Bloomberg News reports:

FICO, owner of the credit-scoring formula most widely used by U.S. lenders, is giving some consumers access to their credit scores for free, even before they apply for a loan. The offering starts today for credit-card holders of two companies: Barclaycard US, a unit of London-based Barclays Plc (BARC), and First Bankcard of Omaha, Nebraska-based First National Bank of Omaha, FICO said in a statement. San Jose, California-based FICO, formerly known as Fair Isaac Corp. (FICO), is talking to other banks about giving the scores for free, said Anthony Sprauve, the firm’s senior consumer credit specialist.

FICO ultimately hopes to make free credit scores available to millions of consumers. It’s a good step, but still a limited one. FICO is a private company, so it’s internal agreements with banks don’t have the force of law. Will the credit scores consumers are given really be the same ones lenders are using to evaluate them? And what about consumers who are not affiliated with a bank participating in the FICO program? They are certainly out of luck. So while this corporate action is an encouraging sign, legislation guaranteeing fair consumer access to credit scores is still needed.

As I’ve written:

Credit reports and scores have a direct and growing impact on Americans’ economic security and opportunity. Having poor credit can mean a consumer will end up paying a higher interest rate for a loan or a higher premium for car or homeowner’s insurance; have their application for a loan or insurance denied; be turned down for a job, or even be terminated from their current one. Credit history can affect the way Americans are treated by landlords, utility companies, and hospitals.

Given how consequential this information is and the fact that it is ultimately our personal data, we should have the right to access it free of charge.