CFPB's Free Credit Score Initiative
Written by: Kristy Welsh
Last Updated: September 25, 2017
While you are legally entitled to a receive your credit reports for free once a year, the same is not true of your credit scores. Though your scores are determined by the information you can see on your reports, it is impossible to have a clear understanding of how you are being judged by lenders if you do not know the number they use to rate your creditworthiness.
The Consumer Financial Protection Bureau (CFPB) aims to change all this via an initiative encouraging credit card issuers to inform their cardholders of their credit scores. CFPB Director Richard Cordray sent letters requesting as much to CEO's of the nation's top credit card issuers, followed up by personal phone calls.
It appears, though, that some credit card companies need no such nudging. Some were way ahead of the curve, offering free credit scores months before the CFPB's call for action.
Why Offer Free Scores Now?
All of this comes in response to FICO's 2013 announcement of its FICO Score Open Access Program. Lenders already purchase FICO credit scores on borrowers. The new FICO program allows said lenders to share these scores with cardholders at no additional charge.
Are Credit Card Companies Required to Provide Cardholders With a Free Credit Score?
No, you will only receive a free credit score from a credit card issuer if:
- you are turned down for a credit card,
- you receive a less favorable interest rate than you applied for, or
- your interest rate goes up.
Which Credit Card Issuers Provide Cardholders With Free Credit Scores?
In Fall 2013, Discover, Barclaycard, and First Bankcard started providing free credit scores to their cardholders.
How Are Free Credit Scores Provided by Credit Card Issuers?
Free credit scores may be included on monthly credit card statements and/or displayed on cardholder online accounts.
Are the Free Credit Scores Provided by Credit Card Issuers Real Credit Scores?
As you may know, there are already plenty of offers out there for free credit scores, most of which require you to sign up for a credit monitoring service. However, these free credit scores are usually not the same scores seen and used by lenders. So the idea behind free scores provided by credit card issuers is that the numbers provided are the same ones they use to determine your creditworthiness, interest rates, etc. Even the credit scores you purchase through FICO itself aren't necessarily the same scores used by lenders.
Why is it Important to See a Credit Score Every Month?
In prepared remarks at a Consumer Advisory Board meeting in February 2014, CFPB Director Richard Cordray presented a number of reasons why keeping a close eye on your credit score matters so much:
- "If scores are lower than expected or if they change over time, more consumers may take the initiative to request their credit reports. This will allow them to address concerns, dispute errors or fraud-related entries, and improve negative aspects of their credit usage."
- Plus, "Customers who monitor and manage their credit standing should, on average, be less likely to become delinquent or to default."
Is Offering Free Credit Scores Via Credit Card Issuers Really the Best Way to Go?
Two-thirds of Americans have at least one credit card, so it does seem a pretty effective means of raising credit score awareness. However, Cordray hinted at the February 2014 Consumer Advisory Board meeting that the initiative probably won't stop there; "I see no reason why this approach should not be replicated with customers across other product lines as well."