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Monday, January 17, 2011

Free Federal Reserve brochure explains credit decisions

WASHINGTON – Jan. 17, 2011 – Lenders usually consider a consumer’s credit history or credit score when deciding whether to extend credit and at what interest rate. A new Federal Reserve publication available online helps consumers understand the new notices they may receive from lenders when credit reports or credit scores affect a decision to grant credit.

The publication, “What You Need to Know: New Rules about Credit Decisions and Notice,” describes the types of notices consumers may receive. It includes links to sample notices, information on what consumers should do if they receive a notice, and instructions on how to dispute credit report errors.

The notices are now required by rules issued by the Federal Reserve Board and the Federal Trade Commission. The new rules took effect Jan. 1, 2011.

Under the rules, a creditor must provide a notice to the consumer when, based on the consumer’s credit report, the creditor offers loan terms that are less favorable than terms provided to other consumers. Consumers who receive this “risk-based pricing” notice have a right to get a free credit report to check the lender’s accuracy.

As an alternative to providing risk-based pricing notices, creditors can choose to give credit applicants a free credit score and information about their score.

Today, most consumers must pay a fee to obtain their credit score. While the free credit reports contain information about payment history and other details used to create a credit score, they do not include the numbers that lenders use to determine an interest rates.

To download the report that can be given to homebuyers, go to the Federal Reserve’s website.

© 2011 Florida Realtors®

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