Finally - Free credit scores on horizon

The financial-reform bill that the Senate passed last week includes an amendment that would give individuals the right to see their scores if those numbers were used against them in a financial transaction.

In other words, if you were denied a mortgage or insurance, or had to pay more for either one because of your credit, you'd get to see the score that was used to make the decision.

This is a big deal, gentle readers. You've been able to see your credit reports -- a history of what you've borrowed and how well you've repaid it -- for free since 2003, but the three-digit scores calculated from those reports have continued to carry a price tag.

Consumer advocates, including myself, have been pushing Congress to give people free access to their scores. But some proposals were mushy on the issue of which scores consumers would get to see.

Knowing the scores:

Not all credit scores are created equal, and the credit bureaus are famous for selling consumers "educational" scores that aren't widely used by lenders. And there are many variations of the FICO score, including versions tailored to auto, credit card, installment loan and finance companies that are rarely seen.

"There was a question whether they would wind up with a score that isn't the same one used by the lender or the insurance company," said credit expert John Ulzheimer, who writes for Credit.com and who advised Sen. Mark Udall, D-Colo., in drafting this amendment. Under the amendment language, "you have a right to see the report and the score that was used. It's a transactional score versus an educational score."

This amendment falls short of the full disclosure I've called for in the past, which would be to ensure all consumers had free access to their FICOs, the credit scores used by most lenders. Free FICOs, by the way, is a concept supported by Fair Isaac, the company that created the FICO scoring formula, and vigorously opposed by the credit bureaus that want to sell you those other scores.

But this financial-services amendment is a better deal in some ways. If the amendment becomes law -- it has to survive the reconciliation process, in which the Senate's reform bill is merged with the one passed by the House -- it will expand dramatically the universe of relevant scores to which you'll have access if your scores cause you a problem.

"In the past, (scores like the FICO auto version have) been like a unicorn. People talked about it all the time, but nobody had actually ever seen it," Ulzheimer said. "Now you'll get to see the unicorn."

The world of insurance scores is even more diverse. No one formula dominates this industry, as FICO does lending, and many of the largest insurers have their own proprietary scores. Seeing these numbers could start to peel back the mystery of insurance scoring, just as access to FICO scores a decade ago started cracking open the credit-scoring vault. As more people learned their FICOs and how important they were, the pressure mounted for the score's creators to disclose more about how they worked, and today we know far more about the inner machinery.

The other nice thing about the amendment is that it would neatly cut out the credit bureaus, the companies that have made getting your free annual credit reports such a circus.

The bureaus that run the federally mandated site, AnnualCreditReport.com, pelt you with advertisements trying to get you to buy scores and credit monitoring when you're just trying to get your free reports.Visit: http://market-timing.org for other sources.