Free can almost start to feel like a dirty word today, especially when it’s used in conjunction with the financial industry. When it comes to a ‘free’ credit score, many people don’t know that their real scores are determined by FICO as opposed to the major credit reporting bureaus. Experian, Equifax, and TransUnion need to pay a fee to FICO to get the proper score, and they’re always looking for ways to subvert paying that fee. It’s smart to get the full picture behind all those amazing free offers that seem to come in on a daily basis.
The Credit Bureaus’ Solution
Instead of going through FICO, these credit bureaus use their own reporting tools to create a score they feel reflects your spending habits. But the problem is that this score may end up being different from your real score, throwing a wrench in your financial planning.
TransUnion and Equifax to Pay $5.5 Million in Fines
The Consumer Financial Protection Bureau (CFPB) recently ordered TransUnion and Equifax to pay $5.5 million in fines to the bureau and $17.6 million in refunds to their customers. That’s 2 of the major 3 credit agencies taking a huge financial hit because they weren’t exactly upfront with how they conducted their business. They advertised the scores they reported were used by lenders to make decisions, but in fact, this was not so.
They weren’t only fined for misrepresenting the truth, but also for enticing people to sign up for trials that were either free or extremely inexpensive, only to let those accounts auto-renew every month for the normal fee. These details were spelled out in fine print but were misleading for many people who just wanted a one-time service. Both companies made statements stating they felt they had complied with the laws and maintained transparency.
How Can I Properly Monitor My Credit Score?
Credit scores aren’t just used by lenders, but also give you a way to verify if you’ve become a victim of the ever-growing identity theft industry. They can range anywhere from 300 to 850 points, and the higher you go, the more you have access to the best in lending rates. Free credit scores may seem like the cheapest way to stay on top of your responsibilities, but you need to know the full story behind them before you use them.
There is no way to get a completely free (and accurate) credit score, but you can sign up with a credit card company that will provide you with your FICO score as one of their benefits. You can also get one free report a year from each of the bureaus, but this won’t do you much good if you become the victim of ongoing identity theft. While general monitoring may be done through free online credit websites, it’s worth getting your real score if you’re planning to buy something major like a home or property.
Protect Your Credit and Monitor Your Question
After seeing the original article posted by NBC, Justin Camper, president, and CEO of Build My Scores had this to say about it:
“NBC is accurate on a lot of what it said but when they mentioned that free scores from sites like Credit Karma and Credit Sesame are close to FICO scores, they are not accurate. It depends on what you apply for and if you have any collections or charge-offs on your credit. A mortgage lender will use a model that is anywhere from 10-80 points off from what these sites report. For example, a car loan will use another model and a credit card will use yet another. The newest models out of the free sites do not count medical collection or paid/settled collection against your score but most lenders’ models will.
I suggest a consumer spend $29.99 and go to myfico.com because they will give you all 4 scores: home loan, car loan, credit card, and the new FICO 8. I believe it is vital to us as consumers to monitor our credit. Use one of the free sites or pay for a monitoring service for $29.99 a month. Either way, it will help protect you and alert you when things change on your credit so you can be proactive versus reactive to issues with your credit.”
If you’re looking to improve your credit score, it’s completely possible. People all over the country have done it, and you can too!