New Bill Would Mandate a Free Annual Credit Score

Americans would gain free access to their credit scores and new rights to challenge errors that keep scores low under a bill introduced in the U.S. Senate on Wednesday.

The “Stop Errors in Credit Use and Reporting (SECURE) Act” is sponsored by Sens. Brian Schatz (D-Hawaii) and Sherrod Brown (D-Ohio). The legislation would force the credit industry to supply consumers with “access to meaningful credit scores free of charge annually.” It also would establish a national registry of credit reporting agents so that consumers know which companies are collecting and disseminating information about them; enhance consumer rights to fix credit report errors that lead to artificially low scores; and give consumers new legal rights to get redress from credit bureaus and banks that deny them credit based on errors.

“In today’s economy, it is critical that consumers have access to a safe and reliable way of checking their credit reports and scores,” said Sen. Brown.

Consumers Union, which recently issued a report on the difficulty consumers face dealing with credit score and credit report errors, hailed the legislation.

“Maintaining an accurate credit report is absolutely critical for consumers in today’s economy,” said Pamela Banks, policy counsel for Consumers Union. “But too often, credit reports contain errors and those mistakes can mean higher interest rates on loans, pricier insurance premiums, and even missed job opportunities. The SECURE Act provides a good framework for holding credit reporting agencies and creditors accountable for making sure credit reports are fair and accurate. Giving consumers free access to their credit score will help consumers know where they stand with lenders and others when it comes to their credit record.”

There is a new focus in Washington D.C. on credit scores and the possibility of giving consumers free access to them. In February, the Consumer Financial Protection Bureau called on the credit industry to voluntarily offer scores to consumers. The banking industry reaction to that suggestion was initially negative.

“There are a variety of ways banks work to educate their customers and help them make the right choices,” Ken Clayton, the American Bankers Association’s chief counsel, said at the time. “It seems inappropriate for a government agency to endorse one ‘good idea’ as a best practice and seek to impose it on everyone. … Attempts to dictate one result once again opens the bureau to criticism that it is picking winners and losers, and is overreaching in its efforts to micromanage the marketplace.”

Unanswered Questions

The SECURE Act ratchets up the rhetoric on the idea considerably. The proposal leaves numerous questions unanswered, however. Chief among them: what credit scores would be free to consumers, how would they be delivered, and who would pay the cost?

Most consumers don’t have a single credit score, but rather dozens of proprietary scores maintained by various financial institutions. All are based on information in a consumer’s credit report, and many are based on the traditional FICO score invented by Fair Isaac. But providing any single credit score annually might not give consumers an accurate picture of their real ability to borrow in any given marketplace.

The CFPB called on credit card issuers to send credit scores to consumers through monthly bills. Consumers Union recommended that score be provided via the free annual credit report that consumers can now obtain at AnnualCreditReport.com, but only a fraction of Americans use the site today. With either notion, there is a cost for companies involved. They’d certainly face an increase in customer service calls, for example, from consumers with questions about the scores.

Still, there is considerable appetite among consumers to see their scores, and Consumers Union argues that access should be required by federal law.

“Consumers shouldn’t have such a hard time obtaining a reliable credit score,” said Maureen Mahoney, public policy fellow for Consumers Union. “Congress should give all consumers the right to get the same credit scores used by lenders at no cost every year. Free credit scores are especially important for those without bank accounts or credit cards who don’t qualify for current voluntary programs.”

[Editor’s note: There are a number of ways you can get your credit scores for free. Some credit card issuers are offering consumers their free scores every month; there are also tools that give you access to your scores for free, like the one Credit.com offers, along with an analysis of your credit.]