Ask Stacy: Credit Reports are Free – Why Aren’t Scores?

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Here’s a recent reader question – maybe you’ve wondered about it as well:

Do you have any idea why we are able to get a free credit report once per year, but not the credit score? Why does that cost money, especially since it seems to be part of a credit bureau report and lenders base part of their decision on the score when considering a transaction? – Susan

Last week, I answered a question from a reader who wanted to get his free annual credit report. So it’s only fitting that this week I answer the excellent question of why we can’t also get a free peek at our credit scores.

But before I answer that, let’s define the difference between credit reports and credit scores: a lot of people seem to get these confused.

Consider the classes you took in school. All the tests and papers you turned in were your class history, or report. The A you got at the end of the class that summarized your overall work was your score. Same with credit: your credit report is the detailed history of your reported credit activities – your credit score boils it all down into a simple number.

Credit Reporting Agencies (CRAs) are required by law to furnish you with a free copy of your credit report every year, but they’re not required to give you a free copy of your credit score.

Why do credit scores exist?

A simple numerical score makes it easier for the bank’s computer to decide whether to loan you money. After all, it takes time, experience and knowledge to comb through your credit report and decide whether you’re worthy of a loan, but a trained monkey can read a number and shuffle your application off to the proper stack.

With the most popular score – known as a FICO score – your number will be between 300 and a perfect 850. The higher your score, the better the deal you’re likely to get on loans. Your credit score can also be used in seemingly unrelated things, like employment: some companies apparently believe employees with higher scores are more desirable – although this may be changing. And even your insurance rates can be influenced by your credit score: some insurers believe people who wreck their credit are more likely to wreck their cars.

Why can’t I see it for free?

Perhaps you’re wondering, as Susan is, how some company you’re never heard of can take your personal credit information, use a secret formula to boil it down into one number, use that number to influence your life in truly radical ways, then refuse to give you a glimpse at it unless you’re willing to pay.

I’ve been wondering that for years – so have lots of other consumer advocates.

Here’s a cut-and-paste from the last time I answered a similar question nearly a year ago:

As for credit scores: while you can get your credit report from, you can’t get your credit score there. In fact, you can’t get your credit score free anywhere, at least not the one that’s in most common use, the one from Fair Isaac. They’ll charge you $19.95 to see it. And that’s after being forced to wade through a barrage of more expensive up-sells they attempt, including a $50 option from someone who presents herself as a consumer advocate, Suze Orman: shame on you, Suze.

Since your credit score is obviously super-important, and is derived from your personal credit history, you may feel justifiably confused by why you should have to pay 20 bucks to see it. The explanation for that I can summarize with one word: lobbying. The financial services lobby in this country is one of our democracy’s most powerful. To get a fair shake for consumers in virtually anything has always been an up-hill battle. In the case of getting a free look at your credit report, for example, it took years. In the case of being able to see your credit score, it hasn’t happened yet.

But true consumer advocates, like me, will continue to point out what a travesty it is for people like you to have to pay big bucks to look at something which is ultimately already yours: your credit score.

Interestingly, something happened on the way to Financial Reform this past Spring: you almost did get the opportunity to have a free look at your credit score. Annual free credit scores were actually written into one version of the bill. Why didn’t that provision survive? See above: lobbying. Republican members of the Senate had this provision removed – how they could possibly justify this, I have no idea.

In the final version, however, Financial Reform legislation only allows consumers who are denied a loan or suffer some other sort of “adverse action” to get a free look at their credit score. In addition to being turned down for a loan, other “adverse actions” that could result in a free look at your credit score include an increase in your cost of insurance, being charged more for, or being denied, a car lease, or if the interest rate you’re offered on a credit card or loan is higher than one being offered for those with excellent credit.

Isn’t there anything I can do?

First, don’t believe any website that says you can get your score for free, because there’s always a catch. For instance, the myFICO website touts in big red letters that your score is free – until you see the asterisk and look at the fine print…

“When you order your free FICO Score here, you will begin your 10-day trial membership in Score Watch. If you don’t cancel your membership within the 10-day trial period, you will be billed $12.95 for each month that you continue your membership.”

So one thing you might try is getting your score free, then canceling the service. But before you go down that road, make sure you set up a free email account just for spam – because even when you cancel your trial membership, odds are your email address will be sold.

If that sounds like too much work, you can also get an estimate of your credit score at sites like Creditkarma and Quizzle. But these sites take your personal information and make educated guesses, so don’t rely on them for specifics.

To learn how to improve your credit score, see 3 Steps to Improve Your Credit Score – Fast.

Got more money questions? Browse lots more Ask Stacy answers here.

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