Apps that provide access to credit scores may not offer all of the benefits users expect, and they can come with extra costs and risks that people may not foresee, Consumer Reports said after an investigation.
Americans can get access their credit reports for free once a year, but they don’t have a similar right to their credit scores, except in some cases. In response, companies have created apps that provide access to credit scores and promise to help users improve them.
Consumers who use the apps told Consumer Reports that they like having 24/7 access to their credit information so they can track it and catch unauthorized use of accounts. Some users raised concerns about the accuracy of their scores, the annoyance of marketing – including being pushed to sign up for additional credit rather than decrease debt – and the risk that their information will be sold to other companies or stolen in a data breach.
“Most of the apps we examined offer credit scores that aren’t typically used by lenders and come with other drawbacks, like unnecessary costs and privacy risks,” said Syed Ejaz, financial policy analyst for Consumer Reports.
No one should have to pay extra and trade away their personal data to private companies just to access their own credit information, Ejaz said.
Consumer Reports examined five popular credit score apps: Credit Karma, Credit Sesame, Experian Credit Report, MyFICO, and TransUnion: Score & Report. It found that:
- None of the apps provide users with free access to credit scores that most lenders use. MyFICO and Experian Credit Report charge users for access to the “industry” credit scores lenders typically use. MyFICO charges $19.95 a month and Experian charges $19.99 a month, or more than $200 annually.
- Four of the five charge for credit reports consumers can get for free once a year at annualcreditreport.com: Credit Karma, Credit Sesame, Experian Credit Report, and TransUnion: Score & Report. Since the start of the covid-19 pandemic, the major credit reporting agencies have provided free weekly access to credit reports through this website and plan to continue doing so through April 20, 2022.
- All five collect private information from users and appear to share it beyond the parties named in their privacy policies. The companies use this data to develop detailed user profiles for marketing products or services to users. This extensive data collection may not have immediate benefits for consumers, and could pose a privacy risk, especially with so many data breaches at credit bureaus and data brokers over the years.
- Four of the five promote financial products that may not be in users’ best interests: Credit Karma, Credit Sesame, Experian Credit Report, and TransUnion: Score & Report. These apps promote other financial products and services as personalized “advice” or “recommendations” for raising credit scores or saving money but disclose in the fine print that the services aren’t necessarily in users’ best interests. The app providers make money when users sign up for the promoted financial services and earn the most from the deals that are listed most prominently.
- All five services require users to agree to mandatory arbitration clauses that limit their ability to sue the companies in court if they’re harmed.
Consumer Reports’ tips for consumers
Consumer Reports is advising consumers to consider alternatives to these apps by checking their credit reports regularly at no cost through annualcreditreport.com and to dispute any errors that may appear on them, Ejaz said. Many banks and credit cards also offer free access to credit scores to their customers.
Consumers who use these apps should be aware of their costs and limitations. The financial products and services they recommend may not be in users’ best interests.
Consumer Reports’ recommendations for Congress and app providers
Ejaz said Consumer Reports supports federal legislation, which would provide consumers free access to credit scores that lenders use, and, which would establish a secure portal where consumers can access credit reports and scores for free.
In addition, Consumer Reports is urging Congress to ban arbitration agreements in financial product and service contracts. It’s also asking Congress to pass national privacy legislation that creates strong protections for consumers and requires strict data security practices for companies.
If Congress doesn’t act, Consumer Reports is calling on app providers to offer free access to credit scores lenders use and to direct users to access free credit reports through annualcreditreport.com, he said.
It’s also urging providers to remove mandatory arbitration clauses from contracts and to only promote products and services that are in the best interests of users.
In addition, app providers should clearly disclose the third parties with which users’ data is shared or sold, Ejaz said.