Last week I said the credit score purveyor do a very good marketing job in making something of a non-issue to most people seem like a big deal. The marketing creates artificial demand from people to buy their credit scores.
Actually their marketing is too good. It also created the demand from people to get their credit scores for free. When Ann Carrns at New York Times Bucks blog wrote about a bank selling credit score updates for $2.99 a month, she asked:
“But if the score is so important to customers, why not offer it free?”
Being important and offering it free have nothing to do with each other. Eating healthy food is important but grocery stores aren’t offering food for free. If it’s that important, you should be ready to pay for it.
The free credit score movement almost got its wish granted. The Dodd-Frank Wall Street Reform and Consumer Protection Act passed last year requires that lenders send the applicant their credit score for free if the credit application is denied or if the applicant didn’t receive the best terms.
Some are hoping because it’s too much trouble for the lenders to document their compliance with the new law, they will just take the easy way out and send the credit score to every applicant for free. That way they are always covered. The lenders also won’t have to piss off the borrowers by telling them they didn’t get the best rate.
Although I don’t care much about credit score, I must come to its defense. There are good reasons credit score isn’t free and it shouldn’t be free. No matter how dubious the value is, it shouldn’t be mandated that it be given away for free.
It’s My Score
A typical argument for free credit score is:
“It’s my score. It belongs to me. Of course it should be free.”
Not really. The credit score is a score calculated on you but it’s not yours. You didn’t do anything to produce it.
The credit bureaus gathered data from the creditors about their experience with you. The scoring companies, FICO and what not, invested time and effort in math models. They convinced lenders their models have predictive power on future performance. You did none of that. How is the credit score yours?
I Get Free Credit Reports
Another argument for free credit score is:
“I already get my credit reports for free. The credit score should be free as well.”
You get free credit reports so that you have an opportunity to correct any mistakes on the reports. If the credit score is wrong because of bad entries on the credit reports, you should correct the reports.
When the credit reports are accurate, the credit score is by definition accurate, because the score is just the result of applying a math formula to the data on the credit reports. There is nothing for you to correct on the credit score itself. Therefore it’s not necessary to give it to you for free.
Bank Already Has It
A third argument for free credit score is:
“Banks and credit card companies already have my credit score. They should just show it to me.”
It’s true banks and credit card companies buy credit score updates to monitor all borrowers. They already have your latest credit score. But sharing it with you is a different matter. Credit score vendors sell scores to the banks on specific licensing terms. They don’t have to allow the banks to share them with you. They produced the scores. They get to set the terms.
My opinion on credit score is still the same. If you pay your bills on time and you check your credit reports periodically for mistakes, don’t worry about the score. Don’t waste money on buying your score. Don’t bother signing up and canceling free trials. If you really want to know, use a service that give you a free score (Credit Karma, Credit Sesame, etc.).