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Reprinted from Scotsman Guide Residential Edition and scotsmanguide.com, February 2012

3 New Types of Consumer Credit NotificationsFamiliarize yourself with new notices and help clients better understand their credit

increased by the lender upon review of the credit report and score. This notice delin-eates the factors used in determining the rate increase in order to make it easier for consumers to understand why their rate has changed.

• • •All of these new notifications are intended to allow consumers to check the accuracy of their reports and better enable them to respond to the credit reporting agency should any changes be necessary.

Before contacting their credit reporting agency, however, consumers may want to discuss how their report is affecting the price they’re paying for borrowing, a discus-sion they may want to begin with mortgage professionals themselves. Keeping yourself familiar with these new types of notices can better prepare you for these discussions and, in turn, better prepare your clients to manage their finances. •

In order to demystify the business of credit for consumers, this past sum-mer the Board of Governors of the

Federal Reserve System introduced new notification rules. Now consumers will have broader access to information in their credit file, allowing them to check and correct any recorded inaccuracies while also under-standing why those inaccuracies occurred.

Although these changes were made with the consumer in mind, mortgage originators should make themselves familiar with the changes as well. Stay up-to-date and learn about these new types of consumer notifications:

1. Credit Score NoticeWhen some consumers apply for credit, they’ll now expect a Credit Score Notice to be received. This document lists the consumer’s credit score and outlines how it compares to the scores of other individuals who are applying for the same type of loan.

Lenders need to provide this notice to all applicants regardless of the type of credit being sought. If a consumer doesn’t have a credit score, the notice from the lender should include the name of the credit reporting agency that has no score on file for the consumer.

2. Adverse Action NoticeIf a consumer’s credit score is reviewed and subsequently declined, that consumer will need to receive an Adverse Action Notice.

The contents of this document include the consumer’s credit score and any pertinent information related to that number.

Should inaccuracies be found, applicants have the ability to check their scores and dispute the information with the credit bu-reau. These inaccuracies can include any of the following:

•• Incorrect•personal•information•• Tradelines•and•collection•accounts•• Payment•history•• Information•recorded•as•public•record•• Mixing•of•files•and•identities•of•

consumers•• Re-aging•of•debt•• Information•still•on•file•that’s•past•the•

statute•of•limitations

3. Risk-Based Pricing NoticeIf consumers feel that they’re being offered new credit less favorable than that of other consumers applying for the same loan, it’s incumbent upon lenders to send their cli-ents a Risk-Based Pricing Notice.

This notification alerts consumers to the possibility of inaccurate or disputable infor-mation in their credit files. An investigation resulting in the removal of inaccurate infor-mation can save consumers money while also making it easier to acquire credit on more favorable terms.

A lender also must send an Account Review Risk-Based Pricing Notice to a consumer who has an existing credit ac-count where the annual percentage rate is

By Elizabeth Karwowski Founder Get Credit Healthy Inc.

Elizabeth Karwowski founded Get Credit Healthy Inc., a consumer-advocacy organization, to help individuals improve their credit health. She has FICO and Fair Credit Reporting Act certifications. Get Credit Healthy has been featured on NBC and Fox News and has helped hundreds of people restore their credit. In 2010, Karwowski began volunteering as a counselor with S.C.O.R.E., a nonprofit resource partner with the U.S. Small Business Administration. Reach her at (877) 850-3444, ext. 1, or experts@getcredithealthy.com.