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Posted On: 12/19/2012

QUESTION:

We’ve been refinancing our home, and without asking, the lender sent our credit scores. Do we have to pay for this service?

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ANSWER:

What you see is the result of Wall Street reform. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, lenders are required to provide a numerical credit score without cost each time they take “any adverse action” against a mortgage applicant.

At first glance, this language seems to say that lenders must provide a free credit score only when a mortgage application is denied, but the “adverse action” language can also be read to include any loan originated by a lender when the borrower does not get the best-available rate and terms.

If we look at this broader interpretation of “any adverse action,” then three points arise:

First, there are instances when the “best available rates and terms” for a given borrower at a particular point in time can be debated. For instance, one lender might see more risk in a given credit score than another.

Second, the definition of a “best available rate” is slippery. One problem is that rates are always in flux, so it’s tough to be certain what actually is the best rate at any given moment.

Third, the role of the lender is not passive. Borrowers routinely rely on lenders for advice and information, and it is lenders who underwrite each loan they process.

As a result of such questions – and in an abundance of caution – lenders now make scores available to loan applicants as a routine matter.

For instance, when my wife and I recently applied to refinance a mortgage, the lender took the application over the phone. While we were actually on the line, he obtained our credit scores from three separate credit-reporting bureaus, and a few days later we each received the middle score by mail.

For specifics, speak with your lender when making an application.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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