Watchdog Urges Credit Card Companies to Offer Free Credit Scores

Richard Cordray, the director of the Consumer Financial Protection Bureau, has been sending letters to the nation’s top credit card companies, encouraging them to give customers free credit scores. In a Consumer Advisory Board meeting Thursday, Cordray amplified his request, once again calling on the credit card companies to make freely available the scores they use in lending decisions, in addition to other financial literacy content.

This may sound familiar — FICO rolled out its Open Access program in November, giving free credit scores to credit card customers of Discover, Barclaycard and First Bankcard. In his remarks before the advisory board meeting, Cordray commended Discover for offering scores as an educational tool, saying the idea is that consumers may be more likely to review their credit reports (on which scores are based) if they regularly have access to their scores.

On the first page of a Discover credit card statement, the cardholder sees the score the issuer uses when evaluating that person’s account, in addition to an explanation of the main drivers of that person’s credit score. Brian Hughes, Discover’s senior vice president of cardholder marketing, said they have seen 600,000 visits to the part of the company’s website explaining how the credit score is calculated, and Discover has driven 30,000 customers to AnnualCreditReport.com since starting the program.

Why the big deal about credit scores, you ask? Because they have a huge bearing on your access to credit. There are dozens of scoring models, and you don’t know which one a lender will use, but looking at the same score over time will indicate how your behaviors improve (or hurt) your credit. (In the case of FICO Open Access, it helps to know what score your existing lenders use to evaluate your account, but in general, there’s no way to know what a new lender looks at when you submit an application.) There are a variety of tools to help you monitor your credit scores, including Credit.com’s Credit Report Card, which gives you free monthly updates for two credit scores used by lenders.

“Credit reports and scores can determine the terms of people’s mortgages, whether they qualify for auto loans, or if they are eligible for different credit cards,” Cordray said. “Making consumers’ credit scores freely available on their monthly statement or online makes it easier for them to spot problems with their credit report. We will continue to work to ensure that credit report disputes are fully investigated, errors are fixed, and consumers are treated fairly.”

Credit Reporting Errors

Getting consumers to look at their scores and reports is a huge challenge — fewer than 20% of Americans check their credit reports each year, Cordray said — but what to do once people look at their credit standing presents a larger issue, from the CFPB’s standpoint.

The CFPB started accepting consumer complaints about credit reporting in October 2012, and nearly three-fourths of the complaints involved inaccurate information on credit reports. About 11% of complaints referenced frustration with the dispute process, though recent upgrades to the online dispute-submittal platform e-OSCAR improved the transmission process for dispute paperwork.

But that upgrade was far from a panacea for report-dispute woes. Also Thursday, the CFPB issued notice to furnishers (companies that supply information to credit reporting agencies) that they’re obligated to investigate disputes. The CFPB issued a similar notice in September, but said it has seen furnishers simply delete disputed information from credit reports, rather than diving into the source of the error. Avoiding such investigations is a disservice to consumers, the bureau said, because it doesn’t necessarily prevent the error from popping up on that consumer’s report again, and it doesn’t help identify what could be systemic issues behind errant information.

The panel discussed and will continue to explore ways to get more consumers to review their credit information, with the goal of empowering people with the awareness necessary to improve their credit standing.