Is That Free Credit Score Really Free?
Read the Fine Print on Free Credit Score Offers
Getting access to a free credit score may sound good if you're interested in monitoring your credit. Many banks now offer free credit reporting to their customers, similar to the way credit monitoring services also promote free credit reports and scores. Before signing up for free score access, however, it's important to consider what you may be giving the bank in exchange.
How Banks Can Offer Free Credit Scores
A credit score is a highly personal piece of financial information that consumers traditionally have had to pay for. FICO credit scores, for example, could be purchased for a fee directly from FICO or through each of the major credit bureaus: Equifax, Experian, and TransUnion.
Access to credit scores changed, however, with the introduction of the FICO Score Open Access Program. This program allows participating financial institutions to make FICO credit scores available to their customers at no charge. According to FICO, the program encompasses more than 170 banks and credit unions, allowing more than 300 million consumers to view their credit scores for free. In addition to banks, the program also extends to over 100 credit and financial counseling organizations.
VantageScore, which is an alternative credit scoring model, also offers free credit score access. The list of providers is much smaller, compared to FICO's Open Access Program, but it includes several major banks as well as a number of free credit monitoring services.
Banks and others that offer free FICO scores may only offer your score from one credit bureau, not all three. Your scores from each bureau may be different if each one is reporting different credit information.
What's in It for Banks?
Offering free credit score access isn't necessarily simply a gesture of goodwill on the part of banks. There are certain advantages to making credit scores available to consumers.
First, it can be an effective marketing tool to attract new customers. If you want to get a peek at your score, for example, but your current bank doesn't offer free score access you might consider moving your money to a bank that does. The bank you move to then benefits financially from having your business if you open a credit card, get a loan, or pay banking fees.
Second, offering free credit scores can serve another purpose for the bank. By agreeing to receive your credit score for free electronically, you may also be giving the bank consent to review your personal and financial information. That information could then be used by the bank to determine which products or services should be marketed to you. If you purchase those products or services, the bank makes money.
Check Your Terms of Service
You might be wondering whether you've consented to sharing your financial or personal information without knowing it when getting your credit score. This is where it's helpful to take a closer look at the terms of service for any free credit score or credit reporting programs you've enrolled in. Specifically, you should look for language that mentions the Fair Credit Reporting Act (FCRA) and other applicable credit reporting laws.
The FCRA regulates how consumer credit information is collected and who can access your credit reports.
The FCRA restricts access to consumer credit reports, unless such access is for a “permissible purpose,” as defined by the law. Permissible purposes include issuance of credit or insurance, employment, court orders, and notably, if in response to a consumer’s “written instructions.” Within the free credit report’s terms of service, you will likely find a statement something to the effect of, "by enrolling, you authorize us to obtain your credit report under the FCRA."
For example, American Express’ “MyCredit” service includes the following language in its Terms and Conditions:
Your Authorization to Obtain Your Credit Information
By checking the “I Agree to the above Terms & Conditions” box and clicking “Continue”” during enrollment, you are providing written instructions under the Fair Credit Reporting Act and other applicable laws, including similar state laws, for TransUnion or any other consumer reporting agency to release your credit report information, including a VantageScore Credit Score, to American Express at our request at any time as long as you are enrolled in MyCredit Guide. You agree that we will use this information to provide you with MyCredit Guide, to offer products and services to you, for analytical purposes, and for other purposes as permitted by applicable law.
Other bank-affiliated free credit report providers include similar language in their own Terms and Conditions:
If you've agreed to your bank's terms of service, then you may also have agreed to the bank collecting your data to be used for its own purposes. Because you've given consent, even though you may not have read the fine print, the bank is technically not violating any laws.
It's also important to check the terms of service to understand what happens to your information if you enroll, and then opt out. Opting out of a free credit score or credit monitoring program or closing your account doesn't necessarily mean your information won't continue to be kept and used. Credit Sesame, for example, retains customer information even after an account is deactivated.
Pros and Cons of Free Credit Scores
Getting a free credit score—whether it's a FICO or VantageScore—can be helpful if you're working on improving your credit rating. Being able to view your score initially can help you see which credit scoring factors, such as payment history or credit utilization, you most need to work on. You can track your progress in raising your score over time as your free score is updated each month.
Checking your own score through a free access program won't count against you either. Only hard inquiries from outside credit checks, such as a lender or employer pulling your credit history, will show up on your credit report. You can check your own score as many times as you like without losing points. So can the free credit score providers you’ve granted permission to.
Not having to pay a direct fee to see your score is also a nice perk. Getting full access to your credit file, including your scores from each of the three credit bureaus will cost you just under $60 if you purchase your credit history on a one-time basis from myFICO. For monthly score access, the cost is $19.95 for a basic subscription plan or $39.95 for premium access.
The downside, however, is that getting your score free from a bank may mean becoming a target for the bank's advertising.
Bottom line, it's important to know exactly what you're agreeing to before taking advantage of any free credit score offers.