Free Credit Scores (Seriously, They’re Really Free)

In the world of credit reporting and credit scoring the word “free” gets thrown around too liberally, especially when it comes to products and services marketed to consumers via retail websites.  “Free” in many cases actually means “conditionally free”, which really means it ain’t free.  Last week I wrote about credit related processes that are 100% free but are often included in fee-based subscription services.  This week I’m writing about the very limited number of websites where you can actually get a free credit score, with no strings attached.

My criteria for this article were simple.  The score had to be 100% free with no credit card information exchanged AND the score had to be potentially relevant.  That means there couldn’t be any condition under which the consumer would or could get charged.  It also means there’s a chance that a lender uses the score to make lending related decisions, which required that the scores be commercially available to lenders.

I couldn’t go so far as to say the score has to be the same score used by most lenders because that would limit the score option primarily to a FICO score, which isn’t available for free anywhere.  I left off the many websites that 1) give away scores that aren’t available to lenders 2) give you an approximation (or range) of what your score could be 3) require you to answer a series of questions in order to simulate your score and 4) take a credit card number in exchange for a free score and begin charging you if you don’t cancel a trial credit monitoring subscription.

My criteria left two websites standing, CreditSesame.com and CreditKarma.com.

CreditSesame.com

What Do You Get:  CreditSesame provides a free credit score and a summarized version of the data on your Experian credit report.  This free access to your credit report doesn’t count against your free annual credit report allotment.  That’s a nice bonus on top of the free score.  The credit report data is displayed differently than what you’d see if you pulled you credit report directly from Experian but it’s still easy to read and understand.

The score you get is your Experian National Equivalency Score.  “We selected it because we feel it best approximates the range of the FICO score that is most familiar to consumers”, according to Tony Wahl, Lending Information Manager at CreditSesame.  “The National Equivalency Score is commercially available to lenders”, according to Kristine Snyder, Public Relations Manager at Experian. “The score range is 360 to 840.”

How Often Can You Get It:  “The score comes automatically once a month.  You don’t have to request it over and over again”, according to Wahl.  This autopilot approach is nice because you don’t have to remember to request an updated score, which makes it much more valuable than if it were a “one and done” freebie.  And, the fact that it comes monthly gives your Experian credit report enough time to go through an entire set of monthly updates from your lenders.  That means your newer scores will reflect a fully updated Experian credit report thus giving you a good idea as to your score movement vis-à-vis your monthly credit activity.

Credit Card Required: Nope

Trial Membership Required: Nope

What’s the Catch:  Neither of the companies in this piece is non-profit, which means they are in business to make money.  So how does CreditSesame make money?  CreditSesame makes money by advertising loan products such as first mortgages, second mortgages and auto loans.  Their model is somewhat unique as they only get a bounty if the consumer actually gets a loan, rather than just applying for a loan or clicking through to a lender’s website.  “We only make money when a consumer closes their loan with one of our lending partners. We win only if the consumer wins”, according to Wahl.

CreditKarma.com

What Do You Get:  CreditKarma provides two different credit risk scores for free.  You can get your TransRisk score and you can also get your VantageScore.  Both scores are based on the data in your TransUnion credit file.  And, both TransRisk and VantageScore are commercially available to lenders.  In fact, VantageScore is largely viewed as FICO’s most potentially significant competitor as it’s marketed and distributed by all three of the national credit reporting agencies.

Like CreditSesame, CreditKarma also provides a summarized version of your credit report via their Credit Report Card.  The tool slices apart your TransUnion credit report and summarizes key categories much like a credit scoring system would.  I like this method of display and apparently I’m not the only one.  “One of our most popular tools, in addition to the free scores, is the Credit Report Card”, according to Kenneth Lin, CEO of CreditKarma.

How Often Can You Get It:  “We actually allow you to update your scores every day, in real time”, according to Lin.  Lin and I had a good laugh when I asked him “what were you thinking” with the decision to allow consumers to get their updated scores every day.

Credit Card Required: Nope

Trial Membership Required: Nope

What’s the Catch:  CreditKarma is a lead aggregator or lead generation website.  They attempt to guide traffic to a variety of lender partners where you can apply for financial service products, primarily credit cards and mortgages.  According to Lin, “We sell advertising that display credit card offers and mortgage offers.  CreditKarma also gets a revenue share if you were to apply for a credit card offer displayed on our site.”  This is not an uncommon business model and is shared by many other companies.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of Mint.com or Intuit. Follow John on Twitter.