Lenders must give details on credit denials

Consumers who get turned down for credit cards, mortgages or other loans, or who can't qualify for the best interest rates, already can get a free credit report as part of the rejection process.

Starting Thursday, they will receive their credit score and more detailed explanations, assuming credit scores were used in the lending decision. Rules to be enforced by the new federal Consumer Financial Protection Bureau will add transparency to the credit process.

Consumers who are turned down for a loan, or who get approved on terms materially less favorable than those offered most other customers, will find out why. Lenders will need to provide an explanation, typically citing up to four key factors, and they'll need to provide the person's credit score for free. They must cite which credit score was used and information about it.

Loan applicants who get credit at favorable rates won't get a free credit score.

By getting their credit score after a rejection, consumers should have a better idea about why they got turned down or failed to receive a favorable offer.

Credit scores are based on data compiled in credit reports, so it's wise to review those for accuracy. For free reports, go to annualcreditreport.com. The best way to boost scores is by paying bills on time and managing accounts prudently. Other tips include: limiting new credit applications, keeping older accounts open and maintaining actual credit-card balances at no more than 30 percent of your available credit.

Thursday marks another milestone: the starting date of large-bank regulation by the CFPB. The agency will monitor consumer-financial practices at more than 100 of the nation's biggest institutions.

by Russ Wiles The Arizona Republic Jul. 19, 2011 05:00 PM




Lenders must give details on credit denials