State Law Will Aid Mortgage Applicants

A California bill that allows mortgage applicants to know their credit scores has been signed into law.

The state became the first to pry open the little-known practice of grading credit behavior and entitle consumers access to their credit scores. At least two similar bills are working their way through the U.S. House and Senate.

SB 1607, authored by state Sen. Liz Figueroa (D-Fremont), requires lenders that obtain credit scores in connection with mortgage applications to disclose to applicants the scores and factors that went into them.

It also requires credit-scoring companies to correct inaccurate information that went into computing the score, and to provide lenders with copies of any objection that a consumer files regarding the accuracy of his or her score.

The bill was signed by Gov. Gray Davis on Oct. 7 but does not go into effect until July 1, 2001.

Credit scores, known as FICO scores, are created through a system owned by San Rafael, Calif.-based Fair, Isaac & Co. They are used by the major credit bureaus and a number of lenders to determine a borrower’s ability to pay back a loan.