The decision whether to grant consumers a loan and at what interest rate is based on an individual’s credit score -- that has not changed.
However, a new federal rule which takes effect later this month will change the way lenders disclose a credit decision to consumers.
So if a consumer is turned down for a loan or given a higher interest rate than someone with a better credit score, lenders will be required to give a free credit score report to the consumer.
The report will include the score and reasons that impacted the score, such as late payments or debt.
The final rule was issued by the Federal Trade Commission and Federal Reserve Commission as a change to the Risk-Based Pricing Rule, which refers to the practice of setting or adjusting the price and other terms of credit provided to a consumer based on the consumer’s creditworthiness.