5 Reasons We Need Free Credit Scores Now

Photo (cc) by Stéfan

It’s no exaggeration to say your credit score can change your life. This single number can determine whether you own a home. It affects how much you pay for insurance. It influences how much you pay when you borrow, which determines how long it will take to become debt-free.

Much like your final grade summarized your command of a course in school, your credit score is the distillation of everything in your credit history. Thanks to a law change in 2003, you can now see your credit history free once a year by going to annualcreditreport.com. Yet if you want to see the most commonly used “final grade” – your FICO credit score – you’re expected to pay $19.95. That’s not fair. It shouldn’t be allowed to continue, and you can help change it.

To see what you can do, check out the video below, then read on for more.

Credit reports and credit scores

The reason we have free credit reports through annualcreditreport.com is because consumers and their advocates fought for it. To quote nonprofit Consumers Union, “Consumers won the right to a free copy of their credit reports nearly a decade ago by bombarding Congress with hundreds of thousands of messages.”

Let’s try the same tactic again. As you saw in the video above, Consumers Union is sponsoring a Free Credit Score Petition, which they’ll forward to Congress. Here’s why I want you to join me in signing it….

1. You’re being charged for a number based on your information

From your medical history to your driving record, you have the right to review information compiled about you. That’s only fair. If any agency, private or public, is going to store data about you in ways that can affect your life, you should have the right – even the obligation – to review it for accuracy. Certainly, your credit score falls into this category.

Today, private companies like FICO credit score creator Fair Isaac and the big three credit reporting agencies (CRAs) – TransUnion, Equifax, and Experian – charge whatever they choose for something that I’d argue is already yours.

2. Credit scores shouldn’t be proprietary

To come up with a three-digit FICO score, Fair Isaac applies a proprietary formula to the information in your credit report. Like the formula for Coca-Cola, the way they come up with the score is a trade secret. And like the recipe for Coke, it’s one they presumably make a ton of money from.

But this isn’t soda that you can choose not to consume. It’s your financial life, and you don’t have a choice whether or not to participate. If everyone in America was required to drink Coke, wouldn’t we demand to see what’s in it?

Fair Isaac provides hints into its score formulation on web pages like this, and calls it “education.” What would be educational is to know exactly how these scores are formulated and precisely what influences them. There’s only one reason to keep a formula secret: so it can be sold for more money.

3. Existing “free” scores can be confusing and misleading

Go to MyFICO.com right now and at the top of the page you’ll see “Get your FICO score. Free.” in monster type. But is it really free? No. To get your “free” score, you’re required to enroll in something called Score Watch, which after a 10-day free trial begins automatically billing you $14.95 a month for a minimum of three months. You’ll see similar up-selling at the big three credit agency sites.

There’s also confusion created by other less-common credit scores. For example, CreditKarma offers a no-strings-attached free score. But it’s not the FICO score most commonly used by lenders. Instead, you get TransUnion’s proprietary score called VantageScore, a model developed jointly by the three big credit reporting agencies. Granted, this score is better than none, and it can at least give you an indication of your overall creditworthiness. But since it isn’t the score most lenders will use, it’s not good enough.

Why is there all this up-sell and confusion? Simple. Credit scores are super-important, and they cost money.

4. Other half-measures in the law miss the point

There’s another way to get a free credit score: Get denied for credit, or get offered a crummy interest rate. Since last July, lenders who deny your loan application or offer you less than the best rate have to explain why, including your score if that was a factor.

But getting a free score after you’ve been denied credit is shutting the barn door after the horse has escaped. Your credit score is most important before you apply, not after you’ve been rejected.

5. Free scores and free reports allow us to be smarter with our credit

I recently wrote a post called Should You Pay for Credit Monitoring? In that story, I quoted Lynnette Khalfani-Cox, a personal finance author who supports the idea of paying for a monthly credit monitoring program so you can get unlimited access to credit reports and scores. Here’s what she said…

“The single biggest reason to use credit monitoring is that you’ll receive an incredible amount of credit education simply by staying on top of your credit. The mere act of constantly reviewing your credit files and being aware of changes to your credit profile promotes enhanced financial literacy and better credit awareness.”

Well spoken, Lynnette. But why should people – especially those least able to afford it – have to pay for their education? Allowing credit reporting agencies and Fair Isaac to charge for access to the tools to make you a better borrower doesn’t promote education, it hinders it. Start offering consumers precise information at no cost, and you’ll start shattering myths about how credit works.

Join In

If you agree with my logic, show your support by signing the petition. Then share this story with your friends. Let’s see if together we can right a wrong.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
12 Things Everyone Should Stop Buying This Year
12 Things Everyone Should Stop Buying This Year

These convenient household products come with hidden costs that you might not have considered.

12 Tech Gadgets That Make Daily Life Easier
12 Tech Gadgets That Make Daily Life Easier

These products on Amazon will ease worries and simplify your routine.

10 Items Every First-Aid Kit Should Have
10 Items Every First-Aid Kit Should Have

Take control of your health and safety by customizing your own first-aid kit with these Amazon purchases.

Half of All Retirees Say They Fear This
Half of All Retirees Say They Fear This

Chances are good that you share this fear. Here’s a way to overcome it.

7 Things You Should Buy at Estate Sales
7 Things You Should Buy at Estate Sales

Here’s what an experienced estate sale shopper considers a great find.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
9 Mistakes Everyone Makes When Shopping on Amazon
9 Mistakes Everyone Makes When Shopping on Amazon

Are you losing money due to any of these missteps?

Can a Divorced Widow Claim Her First Husband’s Social Security Benefits?
Can a Divorced Widow Claim Her First Husband’s Social Security Benefits?

The rules are complicated when it comes to eligibility for survivors benefits.

Can a Twice-Divorced Woman Claim Social Security Survivors Benefits?
Can a Twice-Divorced Woman Claim Social Security Survivors Benefits?

Understanding survivors benefits rules is the key to getting the most from your benefit.

These Are the 10 Worst Cars for Depreciation
These Are the 10 Worst Cars for Depreciation

Two types of vehicles are especially likely to see steep plunges in value.

10 Things I Always Buy at Trader Joe’s
10 Things I Always Buy at Trader Joe’s

From snacks to sweets to side dishes, stock your cart with these time-tested favorites on your next TJ’s run.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

5 Ways Social Security Will Change in 2021
5 Ways Social Security Will Change in 2021

These adjustments will affect both workers and retirees in the new year.

11 ‘Disposable’ Items You Should Be Reusing
8 Things You Should Buy at Restaurant Supply Stores
8 Things You Should Buy at Restaurant Supply Stores

You don’t have to be a chef or a restaurant owner to shop here.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

There are easy high-paying majors available in the U.S. — and no bachelor’s degree is required. We’re here to help you find easy degrees that pay well.

Stop Buying These 19 Things Online
Stop Buying These 19 Things Online

The internet has changed how we shop. But for some things, you’re still better off buying the old-fashioned way.

Cut These 11 Expenses Now If You Hope to Retire Early
Cut These 11 Expenses Now If You Hope to Retire Early

Like the idea of financial independence? Part of the FIRE equation is cutting costs.

27 Things You Should Never Pay For — and How to Get Them for Free
27 Things You Should Never Pay For — and How to Get Them for Free

When you know the tricks, you can save big on all kinds of useful things that others pay for.

4 Tax Credits That Will Be More Generous in 2021
4 Tax Credits That Will Be More Generous in 2021

If you are eligible for these tax breaks, they will slash your federal income tax bill — dollar for dollar.

15 Things You Can Get for Free in December
15 Things You Can Get for Free in December

December is here, which means it’s your last chance to take advantage of fabulous freebies in 2020.

7 Tips for Building an Emergency Food Supply
7 Tips for Building an Emergency Food Supply

A pandemic or natural disaster could leave you reliant on your existing emergency food supply. Is your pantry well-prepared for emergencies? Knowing what to stock up on for emergencies can be a difficult task and we’re here to help.

7 Reasons to Carry Mortgage Debt Into Retirement
7 Reasons to Carry Mortgage Debt Into Retirement

It often makes financial sense to not pay off your mortgage before retiring.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.