Credit Score Disclosure.

Senators Charles Schumer, D-N.Y., and Wayne Allard, R-Colo., have introduced "S. 1242 - Consumer Credit Score Disclosure Act of 2001." This legislation requires the disclosure of credit scores to all consumers who apply for home mortgage loans. This legislation is similar to that passed in the state of California to require credit reporting agencies and mortgage lenders to disclose credit scores to consumers who apply for home mortgage loans beginning on July 1, 2001. This viewpoint is an excerpt from a Mortgage Bankers Association of America position paper on the topic.

Background: Credit scores have been used in consumer lending since the 1950s primarily for automobile loans and other consumer loans. However, as the technology advanced and automation increased, consumer credit scores began to be used in mortgage lending by the mid 1990s. Currently, consumer credit scores are used in the proprietary automated underwriting systems of many large lenders, Freddie Mac, FHA and until recently, Fannie Mae (Fannie Mae announced in the summer of 2000 that it would no longer use credit scores in its automated underwriting system).

Fair, Isaac and Co. Inc., which is the leading developer and largest provider of credit scores, estimates that lenders use credit scores in over 75% of all mortgage loan origination decisions. Because credit scores now play such an important role in the mortgage underwriting decision, there has been increasing public interest in the factors used to develop credit scores and public demand for disclosure to the consumer of these factors along with the consumer's actual credit score. Public interest groups believe that disclosure of the factors used to determine credit scores, as well as the scores themselves, would help consumers better understand the credit-granting process and what actions consumers could take over time to improve their scores. In response to this public demand, Fair, Isaac has made public the factors it uses in determining a credit score, along with an explanation of the process of credit scoring and how scores can be improved. In addition, Fair, Isaac announced that it would no longer enforce any previous contractual provisions that it had with credit reporting agencies and lenders that prohibited the disclosure of actual credit scores to consumers. Fair, Isaac has also implemented an Internet-based process with credit reporting agency Equifax that allows anyone to obtain their credit score by submitting a request ...