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Credit score disclosure lessons

By Janna Herron ·
Tuesday, August 28, 2012
Posted: 3 pm ET

I finally laid eyes on a credit score disclosure form, more than a year after new rules required creditors to provide the credit score used in a lending decision if a consumer is denied credit or gets unfavorable terms.

The form came a few days after I was approved for a new rewards credit card at the second lowest annual percentage rate available. (To follow how I chose the card, check out this post.) Because I didn't receive the best possible APR, I was entitled to see my credit score under the new federal rules.

This is what I learned.

Lesson No. 1: Just one medical bill in collections can be hugely damaging to your credit score.

I won't go into detail about a dispute surrounding a medical bill of mine, but instead focus on how costly a collection account can be, even if it's just one item. My FICO credit score has dropped somewhere between 50 and 75 points since the dental bill in question made it to collections.

My score would have most likely improved, if not for the medical bill, because I haven't missed any debt payments and three old derogatory items fell off my report in February after passing the seven-year statute of limitations. Instead, my score dove. Ouch.

"Any debt that has gone into collection has a significant impact on a person's FICO score, regardless of the kind of debt," says Anthony Sprauve, a FICO spokesman. "The higher a person's score before the negative action, the larger the drop.  In some cases that could be as much as 100 points."

There you have it.

Lesson No. 2: The typical FICO credit scoring range from 300 to 850 can be altered.

The credit score disclosure shows the range of scores under the model used. In this instance, the scores ranged from 325 to 850. But the disclosure identified the scoring model as FICO, which made me pause. Again, Sprauve explained the discrepancy.

Although all FICO scores range between 300 and 850, a lender or credit reporting agency can modify the "operational range" of the score, he says.

Thanks, Anthony.

Lesson No. 3: You won't always be provided the key factors hurting your credit score.

I previously thought every time a credit score was disclosed after a consumer received less-than-the-best terms, the disclosure would include up to five factors that weigh on your credit score. I was wrong. If a lender sends a credit score disclosure form to every applicant it approves for credit no matter what terms they received, that form doesn't have to include the key factors.

However, if the lender sends a disclosure only to those who get unfavorable terms -- called a risk-based pricing notice -- the form does include the key factors. Consumers denied credit will receive the key factors in every case.

That's an unfortunate loophole in the rules, because the key factors provide actionable information to consumers on how to improve their credit. If you don’t get them, order your free credit reports at to help figure out why your credit score suffered.

Have you received any of these notices? What did you learn?

Follow me on Twitter: @JannaHerron

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