Why You Don’t Need to Pay for Your Credit Score (Part I)

Why You Don’t Need to Pay for Your Credit Score (Part I)

Maybe you’ve seen some of the news reports, such as the one broadcast by KUTV in Salt Lake City, Utah, about companies “scamming” people with regard to their credit scores.

According to the February 4, 2014 KUTV news report, consumers have been complaining that they’ve paid for their credit score, but when they go to buy a house or a car, they learn the score they have doesn’t match the score used by the lender.

Consumers have filed complaints because they’re being denied loans or being charged higher rates.

In Part I of this two-part post, you’ll learn some basic facts behind FreeCreditReport.com – a site that offers credit reports and credit scores – and why the site is a little misleading. In Part Two, you’ll learn why lenders view credit scores from these sites as meaningless.

How FreeCreditReport.com works

Owned by Experian, FreeCreditReport.com offers consumers a way to get their credit reports and credit scores.

When you arrive at the site’s home page, you’re offered two options: You can get your free credit report by filling out a form, or you can purchase your credit report and credit score for $1.00.

Don’t ignore that disclaimer!

If you go straight to these two options, which most people would do since the calls-to-action are so prominent, you completely miss the disclaimer at the top of the page.

The disclaimer explains that when you purchase the $1.00 option, you’re signing up for a membership. If you don’t cancel your membership within seven days, you’ll then be charged $12.99 a month – indefinitely!

You shouldn’t be paying for credit reports

Interestingly enough, the disclaimer includes a link to annualcreditreport.com – a website authorized by the new Consumer Financial Protection Bureau as being the “official” website from which to order your free credit reports.

To be clear, as a consumer you are guaranteed access to a free copy of your credit report, from each of the reporting bureaus, once a year.

You can obtain your three free reports every 12 months (say every January or June) or you can request a report from a bureau once every four months – like this:

  • Experian in January
  • Equifax in June
  • TransUnion in September

This type of schedule ensures you’re constantly monitoring your credit.

You also get a free copy of your credit report when you apply for a mortgage. Lenders are required to send you copies of your credit reports. Your lender will usually tell you your credit score, too. If your lender doesn’t – ask. Your credit score isn’t confidential information.

(Be sure to see our post on how to determine what your credit score means.)

Stay far away from sites like this

Speaking as a mortgage broker, I recommend that you stay far away from freecreditreport.com and other sites like it. The marketplace is full of noise about identity theft and mistrusting mortgage lenders.

Sites like freecreditreport.com are fanning the flames of fear to generate additional profits for the credit bureaus backing them.

In Part Two of this post, you’ll learn the difference between the various types of credit scores and why lenders only rely on the scores of reports they’ve pulled themselves.

In the meantime, if you’re in the market for a home loan or have been considering a refi, give us a call. We’re here for you.