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.
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