credit cards

A new guide explains the basics of credit

Ahead of risk-based pricing rules that take effect Jan. 1, 2011, the Federal Reserve rolled out a new consumer guide to credit reports and scores. In it, the Fed explains basic information about credit, such as the content of a credit report and how credit scores are used.

Although the guide doesn't mention risk-based pricing rules by name anywhere, it explains that if you receive less-favorable credit terms than other consumers with better credit histories due to information in your credit report, that the creditor "may give you a notice with information about the credit bureau that provided the credit report used to make the decision." The consumer then has 60 days after receiving the notice to request a free credit report.

That notice is a risk-based pricing notice. According to the text of the final rules issued by the Federal Trade Commission and Federal Reserve, the notice must "contain a statement informing the consumer that he or she may obtain a copy of a consumer report, without charge, from the consumer reporting agency identified in the notice."

As a previous Bankrate blog post on the risk-based pricing rules explains, lenders may use one of several methods in determining which consumers should receive a risk-based pricing notice. One of the exceptions to the notice requirement is if the issuer provides all applicants with a credit score disclosure. This disclosure doesn't have to include the offer for a free credit report.

After the new year, consumers who don't qualify for the lowest APR on a new credit card may receive either a risk-based pricing notice or a free credit score. The guide provides context for these credit freebies, and explains the fundamentals of credit reports and scores. offers a plethora of free advice and tools for maintaining a good credit score and error-free credit report.

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Editorial Disclaimer: The editorial content is not provided or commissioned by the credit card issuers. Opinions expressed here are author’s alone, not those of the credit card issuers, and have not been reviewed, approved or otherwise endorsed by the credit card issuers.

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