New Era in Consumer Credit Scores
Can you solve a mystery? If so, how long do you think it will be before the federal government mandates that credit scores be free and accessible to all? The answer may be unknown, but some folks are beginning to see the writing on the wall.
Federal regulators are already moving in this direction. In a letter sent earlier this year, the Consumer Financial Protection Bureau “strongly urges” credit card companies to provide free credit scores, along with educational content, to their customers on a regular basis. The letter closes with CFPB Director Richard Cordray saying: “I will be calling you to follow up on this letter.1”
Even if free credit scores aren’t federally mandated, it might be a good idea to provide them to consumers anyway.
Did you know that about one in four Americans never check their credit report?2 That means millions of U.S. citizens don’t know what’s inside their credit report and probably don’t know their credit scores.
By providing free credit scores and credit report summaries to consumers along with their monthly statement, you would be raising awareness, reducing regulatory pressure, increasing customer engagement and differentiating yourself from the competition.
For customers with good credit, the credit scores and reports may prompt them to discuss getting a new loan or line of credit with your organization. And for those customers whose credit score is on the lower side, they may take the initiative to review their credit report and work on eliminating debt or correcting errors. That can be good for the economy, as these consumers work toward purchasing homes or cars and good for your business, when they turn to you for a mortgage or loan.
If you do decide to leap ahead of the curve and provide free credit scores – as some financial institutions are already doing – you may want to consider providing the VantageScore 3.0 credit score. The VantageScore can offer more consistency than other scores because it was developed jointly by the three national credit bureaus - Experian®, Equifax® and TransUnion®.3
So although providing free credit scores may seem like a prohibitive expense in the beginning, it could turn out to be a great investment in the end. After all, it can make consumers more financially literate, help them make better financial decisions, and in the process, make them better candidates for mortgages and loans.
To learn more about increasing customers' financial literacy, visit the Experian Affinity website.
1 Consumer Financial Protection Bureau, Letter to Credit Card Companies, February 2014.
2 Harris Interactive Study, October 2013
3 Information obtained from www.VantageScore.com
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