Consumers tend to regard the offer of “free” stuff suspiciously, and rightly so, especially when it relates to credit cards. In the past, companies that have offered free credit scores or free credit reports have enrolled unsuspecting consumers into monthly programs that charged fees. The Federal Trade Commission warns consumers that “impostor” websites claiming to offer “free credit scores” are not part of the government-required program that allows people to access their credit report at no charge once a year, through AnnualCreditReport.com.
Now, though, legitimate companies are increasingly offering consumers access to their credit scores for free — no strings attached. Consumer advocates say getting your score can be a useful exercise and offer the motivation to shore up your score if necessary, especially before taking out a big loan. After all, lenders can access your score to judge whether you’re fit to receive a loan, so shouldn’t you know what it is, too?
“I think anything that helps you stay on top of your credit life is a good thing,” says Beverly Harzog, consumer advocate and author of “Confessions of a Credit Junkie.” Still, she cautions consumers against developing a false sense of security simply by accessing their free score or even signing up for a credit monitoring service. Consumers still need to carefully monitor their credit accounts online for fraudulent purchases, which can be the first sign of identity theft, she says.
[Read: Why You Shouldn’t Share Your Good Credit Score on Facebook.]
“A good credit score is really important for getting the things you want, like a car loan or a mortgage,” says Vince Maniago, senior product manager at Mint.com, which recently started offering users access to their free credit score and credit report summary. “Given that it’s such an important aspect of life, we thought this is something Mint users should be getting.”
John Ulzheimer, a credit expert at CreditSesame.com, says that websites often offer free credit scores to attract consumers, who might ultimately sign up for other services or products like premium credit monitoring. “Credit scores have gone from being a consumer product to a loss leader,” he says. For example, CreditSesame.com, which offers free credit scores, also sells “platinum protection,” which includes identity theft insurance of up to $1 million and daily credit score updates for $14.95 a month.
Here are six things you should know before accessing your free credit score from companies:
1. You’ll have to provide some personal information, but you can get the free score quickly.
Even though accessing your score is free, websites providing this service still have to verify your identity by collecting some key information, such as your contact information, address, date of birth and last four digits of your Social Security number. (When this reporter signed up at CreditKarma.com, it took less than two minutes to fill out the required information and access her score and accompanying credit report. At Mint.com, the average user accesses his credit score within 90 seconds.)
2. You should always read the fine print.
Many sites offering free credit scores also offer premium services, such as identity protection or credit score monitoring, and Harzog cautions consumers to be careful not to accidentally sign up for those fee-based services or to be enticed by the sites’ advertisements for credit cards. You also want to get your credit score from a site that doesn’t require you to provide payment information first to avoid accidentally signing up for a monthly fee-based program.
[Read: 5 Questions to Help You Decide Whether to Save or Pay Off Debt.
3. You are not necessarily seeing the same score that a lender would see.
Harzog says that while it can be useful to use these websites to get an idea of your credit health, the specific scores used usually come from one of the credit bureaus, and it’s not necessarily the same score used by lenders to evaluate credit worthiness. (Credit bureaus generate scores based on the information they collect, and the formulas and scores can vary.) Harzog accessed her score through a handful of sites, and she found that her score varied greatly depending on the site. “The best way to get value from these sites is to focus on the grades and recommendations you receive about improving your credit,” and not necessarily zeroing in on the number itself, Harzog says.
4. It’s a good idea to check often and widely.
As long as they are truly free and legitimate, Ulzheimer says consumers should take advantage of as many of the websites offering free credit scores as possible. That way, he says, consumers can get a better understanding of their credit history and standing. “The ‘catch’ to the free scores is that you’ll get some communications from the website pitching you to come back if you ever need to apply for a loan or a credit card. That’s a pretty good trade-off,” he says. Consumers who aren’t interested can simply delete those emails or unsubscribe. CreditSesame.com. CreditKarma.com, Quizzle.com, Mint.com and Credit.com are among the more than a dozen sites that now offer free credit scores.
Maniago says consumers should only access their credit score from companies they know and trust, and echoes the FTC warning about “impostor” sites that try to mimic the official AnnualCreditReport.com. Scam sites might look official but then could collect personal information and use it to either enroll you in costly programs or steal consumers’ identities. Maniago adds that unlike credit score checks that lenders conduct before issuing new loans to consumers, the kind of “soft” checks offered by companies like Mint.com do not adversely affect one’s score.
5. You should still take advantage of AnnualCreditReport.com.
The government mandates that consumers be able to access their credit report once every 12 months through the website AnnualCreditReport.com, and Harzog encourages consumers to continue to take advantage of that option. Consumers can get a report from each credit bureau — Equifax, Experian and TransUnion — once a year. Doing so allows you to spot (and fix) potential mistakes, such as incorrect addresses or accounts, which can improve your credit history and ultimately improve your credit score. It does not, however, provide a credit score.
[See: 10 Ways to Protect Yourself From Online Fraud.]
6. To benefit from the information, you have to take action based on the results.
After you get your free credit score, you can use the information to improve your credit. That includes fixing any potential mistakes or errors on your credit report and paying bills on time each month. “The main benefit of checking your scores in advance is that you’ll be alerted to potential problems and have the opportunity to address them before you’re charged more for credit or insurance because of your scores,” says Gerri Detweiler, director of consumer education for Credit.com. “If you do find problems, it’s a lot less stressful than if you have an application on the line.”
Christina Ra, a spokeswoman for Credit Karma, notes that the FTC reports 1 in 4 consumers have errors on their credit reports that can affect their scores, and 1 in 3 Americans have never checked their credit report. Meanwhile, Credit Karma’s data show that the average U.S. credit score is 633, which is below the 720 threshold that generally allows for the best interest rates and benefits. That means a lot of people could potentially benefit from checking up on their score and report — and taking steps to make improvements.
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Are Free Credit Scores Really Free? originally appeared on usnews.com
