Soon You’ll Know if Your Credit Score Bumped Up Your Mortgage Rate

January 4, 2010 · Posted in News For Homebuyers

Attention consumers: In about a year, you’ll know if your credit score impacted your mortgage rate.

I spoke about the importance of credit scoring with regard to mortgage rates earlier this week, and it appears the government takes it very seriously as well.

The FTC and Federal Reserve want consumers to be informed if they’re receiving higher interest rates as a result of their credit history, per this post from The Truth About Mortgage:

Beginning in 2011 (no, not 2010), consumers will be notified if they receive less favorable terms on their mortgages because of credit imperfections, according to a notice from the Federal Reserve and FTC.

Consumers with less-than-stellar credit will receive “risk-based pricing” notices when applying for mortgages and other types of loans, assuming their credit scores adversely affect the terms and/or interest rate they ultimately receive.

If you’re subject to risk-based pricing, you’ll also have access to a free credit report so you can determine what negative information pushed your rate up. And more importantly, if it’s accurate.

It seems like a good way to empower consumers who often don’t know why they’re receiving interest rates significantly higher than those advertised on TV or the Internet.

Having a better understanding of how your mortgage broker or loan officer came up with your interest rate is definitely a positive for mortgage shoppers, and should make the process all the more transparent.