Update as of June 2015: All three major credit reporting agencies (Experian, Equifax and TransUnion) will now allow nonprofit counselors to share credits reports, as well as the scores, with the consumer.
Nonprofit organizations that offer credit counseling, housing counseling, and other financial counseling services buy credit reports and scores for the consumers they serve. These reports and scores help counselors engage in constructive conversations with their clients about steps the clients can take to improve their financial situation.
Until now, counseling organizations have generally been prohibited by their contracts with the credit reporting agencies from giving the consumer the credit report or score that they have purchased on that consumer’s behalf. For example, a nonprofit organization that purchases a credit report with a FICO credit score has typically signed a three-way agreement with one of the three large credit reporting agencies (TransUnion, Equifax, or Experian) and FICO, agreeing not to provide the report or score to any entity, including the consumer.
This no-sharing policy is common in contracts signed by business users of credit reports and scores. But when applied to consumer counseling, it limits a client’s ability to review the credit history provided by the counselor on their own and may make the consumer more dependent on the counselor to take steps to manage or improve her credit standing. We’ve heard concerns about this issue from counselors and consumers across the country.
A policy change that will affect millions of consumers
FICO’s announcement today signals a change in this policy . FICO has reached new agreements with the three credit reporting agencies that will allow millions of consumers who receive nonprofit credit counseling, housing counseling, and other services to obtain a copy of the FICO score that these organizations have purchased. We’ve been working with industry to make progress on these issues and we are encouraged by this positive step. FICO has taken the additional step to create content to help these consumers understand the key factors that influence their credit scores.
A step in the right direction
These efforts build on our open credit score initiative, which is helping to increase consumers’ access to credit scores and credit reports and empower consumers to improve their financial lives. Last year, we launched this initiative by calling on more of the nation’s top credit card companies to make credit scores freely available to their customers. Today, more than a dozen major credit card issuers are providing credit scores directly and freely to consumers, and they are increasingly being joined by other types of consumer lenders as well.
As part of this ongoing effort, we brought counseling organizations’ concerns about restrictions on their clients’ access to credit information to the attention of the credit reporting companies and FICO and urged that these restrictions be removed. However, even with the policy change on FICO credit scores, individual contracts between the credit reporting agencies and counseling organizations still prohibited the organizations from sharing the credit reports with their clients. This restriction made it harder for counselors to do their job. And it kept the consumers they serve from benefiting fully from the credit information that the counseling service organizations have paid for.
We are encouraged that, as part of this ongoing effort to press forward on these issues, Experian, Trans Union, and Equifax have updated their policies. Nonprofit counselors that purchase credit reports on behalf of their consumer clients will now be able to share those reports, as well as the scores, with the consumer.
Ending restrictions on sharing credit scores and reports by consumer financial counseling organizations will empower consumers to take more control of managing their credit and help counselors to do their jobs more effectively.