SAN DIEGO - California bankers are fighting a state bill that would require lenders to give home loan applicants their credit scores automatically.
The California Bankers Association contends that the measure would create too much operational expense and could expose lenders to liability. But the California Association of Realtors, which championed the bill, says it believes consumers have a right to question their credit scores.
The group says banks might pass along the costs they would incur from disclosing this information, but homebuyers would rather pay a few extra dollars if it could help them obtain loans at lower interest rates, it says.
Californians can get their credit reports from credit agencies free if they are denied a loan or for a fee if they request their reports at any other time. At no time, however, can they get their credit scores.
In addition to making credit scores automatically available, the bill, authored by Sen. Liz Figueroa, D-Fremont, would require that lenders disclose the range of possible scores under the models used, and, when loans are denied, list four factors that lowered applicants' scores.
The Senate overwhelmingly approved the bill in May, and the Assembly is scheduled to vote on it in early August. If it becomes law, it would be the first of its kind in the nation.
The California Bankers Association says it does not mind giving rejected home loan applicants their credit scores. But the group opposes giving scores to those who are approved, said Maurine C. Padden, vice president and senior legislative counsel.
"We do not see the need to automatically give those with excellent credit the information that's required," Ms. Padden said. "To require us to give every loan applicant all of this information would drive up the cost of lending."
Furthermore, she said, disclosing credit scores to customers who were granted loans would increase banks' liability risk.
For example, if first-time homebuyers are approved for a loan but think their score is unusually low, they may investigate and find that their credit report is inaccurate.
Though that is no fault of the lender, Ms. Padden said, consumers might nonetheless take legal action against the lender for charging the higher rate.
However, Alex Creel, senior vice president of government affairs for the realtors association said the bill is necessary so that consumers can find out how scores were calculated.
"The kinds of things that adversely affect your score are not necessarily what you would consider as negative," Mr. Creel said. "For example, if you open a department store credit card in order to take advantage of a store sale, pay off the credit card, and never use it again, you may still get a reduction in points if you have other credit card accounts."
Even shopping for a cell phone can affect a person's credit rating in the models that Fair, Isaac & Co., provides to banks. Craig Watts, consumer affairs manager for the San Rafael, Calif., company said that both are considered credit activity and could affect loan interest rates.
Mr. Creel also defended the provision that lenders supply credit scores both to accepted and rejected applicants.
As for the pass-along costs, "it would be worth the five or six extra bucks to learn how to get the best interest rate," he said.
