New regulations concerning the availability of credit scores will hopefully make it easier to understand why you are turned down for a loan. The Associated Press reports that on July 21, lenders will be required to provide borrowers with the credit score that was used to determine their loan eligibility.
"They are going to see the score that the lender in fact used, which is nice because so many of the scores people buy aren't what lenders use," Craig Watts, the director of public affairs at FICO, told Time Moneyland. "This is going to be a boon for consumers, who can learn why they were declined and what they can do to change their credit rating."
When you apply for a loan, the lender wants to know about your credit history – if you make timely payments, how much debt you have, and how long you have had credit. To obtain this information, a lender can ask a credit bureau for your credit score.
There are three credit bureaus – Equifax, Experian and TransUnion, and each issues its own score, which means that every potential borrower has multiple scores. What is less commonly known is that when a lender requests a credit score, the numbers are generated using specific risk modeling, depending on the reason for your loan, according to the news source.
While you can buy a copy of your credit score, you might not be looking at the same number as the lender. The new rule takes that confusion out of the equation by requiring lenders to share the information they used with you.
If you are applying for a mortgage, the risk factors are going to be much different than if you are trying to get a used car loan. If you are denied a loan, the lenders must provide you with your credit score as well as a range of possible scores, so you can see how far from the acceptable credit score yours may be.
As with most rules, this one comes with exceptions. Lenders that have in-house systems to determine creditworthiness and those that don't look at credit scores during the decision-making process are not required to provide you with your credit score if you are denied. If your credit score is not a factor in applying for a loan, then they have no reason to give you that information.