Borrowers can feel elated with the first gift of the New Year. Starting the first day of 2011, borrowers will have the new right of seeing their credit scores for free. Credit scores are amongst the most important indicators of one’s creditworthiness and until recently they were quite concealed. The credit scores without any charge would be quite a welcome change. On the back of a new federal regulation, credit card issuers and creditors in general have to provide millions of applicants the logic that works behind the interest rates that are charged on the new credit cards or the loan. This rule will benefit all those consumers for whom the interest rates charged are slightly higher than the best rates offered to most other consumers.
The good part about this loan is that for the first time, they would have an opportunity legally to find out why the best possible terms weren’t available for them. The information which will help customers set things right the next time around will be available from now on. Staying consistent with quite a few credit card reforms in the recent past, this rule change will especially help those consumers who want to look for themselves what is going wrong and thereby try to avoid these pitfalls in the future. This new regulation can be considered a belated result after the Fair and Accurate Credit Transactions Act that was passed in 2003. This rule commands the creditors and lenders to provide the information related to the risk dependent pricing of interest rates along with a credit report of the consumer or disclosing the credit score of the consumer.
This risk based pricing points to the general convention until now of fixing interest rates based on the creditworthiness of the applicants with those having a bad credit history considered to be of greater risk. This risk based pricing notice is being seen as a tough demand and hence the general expectation is for a lot of lenders to provide the free FICO credit scores of the customers instead. The FICO score is the most popularly used method of measuring an individual’s creditworthiness. It also has a major impact on the decision made by lenders on what interest rate to approve for a given consumer. This score was completely hidden from customers a decade ago, who in turn found it quite difficult to turn things around in their favour.
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