Tuesday, July 1, 2008

Government Regulations May Keep Consumers Better Informed

Government Regulations May Keep Consumers Better Informed

Having a problem on your credit report can have devastating consequences. For example, if your credit report has a mistake on it that makes you appear to be irresponsible with your finances, you may not get approved for a home loan. If you are approved, you may have to pay a higher interest rate than you should have to pay. In some states, insurance companies also look at credit reports in order to determine the rates they will charge their customers. This means that one simply mistake could potentially cost you hundreds or even thousands of dollars each year.

Luckily, if the Federal Reserve and the Federal Trade Commission get their way, you might not have to worry about this any longer.

Keeping Consumers Informed

Back in 2003, Congress directed these two federal agencies to create a system that would help protect consumers from being negatively affected by erroneous information on their credit reports. More specifically, Congress wanted lenders to be required to notify consumers about the information they found on the credit report that caused them to turn down their loan applications or that caused them to get a higher interest rate.

Although it took a few years to complete, the two agencies have finally published their proposal for accomplishing this task. In fact, the proposal was published in the middle of May and is now open to three months of public comment. If all goes well, the plan may be implemented later this year.

How it Works

Through the proposed system, the process of notifying consumers about credit issues would actually be quite simple. Basically, if a lending institution pulls your information and finds that you do not qualify for its best rate, the loan officer would have to provide you with notification in one of two primary ways. These include:

• Providing you with your credit score as well as a graph showing how your score compares to other applicants as well as the factors that caused your score to be lower. The written notice would also need to provide you with information for contacting your credit bureau in order to obtain a full report.
• Providing you with a tiered pricing grid, which only has to be sent to those applicants that have a score in the lowest tiers.

While this legislation will help consumers become more aware of their possible credit problems, there are still many that are likely to slip through the cracks. For example, lenders would only be required to send notifications to those that have a score that is significantly different from the majority of applicants. Therefore, individuals applying for a mortgage loan that specializes in providing loans to people with poor credit may not qualify for notification because the majority of applicants also have poor credit. Despite its little pitfalls, however, it is definitely a step in the right direction toward keeping consumers better protected and informed.

About the Author: Shannon Kietzman is a well known author and trusted resource. Shannon regularly writes for www.reliacredit.com . For more info and to order your credit report with FREE credit score please visit www.reliacredit.com

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