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Ask John: Buried in Credit Card DebtCredit Report Shopping We all need to review our credit reports several times each year. We need to review them for accuracy, to empower ourselves by knowing our credit scores and by verifying that we have not been the victim of identity theft. credit reports, credit scores, credit score, identity theft, credit cardI've heard so many stories about how to get my credit reports. How do I know which credit report is right for me?BackgroundPlease meet Karen, a 24-year-old credit union marketing representative who lives in Temecula, CA, with her husband Russ. Karen and Russ have been married for 18 months. They are both employed and have excellent credit. It’s “newly established” credit but they’ve always paid their bills on time and try not to max out their credit cards. They live in a small home, which has an interest only mortgage, and have two cars, one of which is paid in full. The other is on a 36-month lease. Her DilemmaSince she is in the financial services industry Karen constantly hears that she should be a proactive manager of her own credit reports. In fact, the credit union she works for provides their members with access to educational content on their website that gives basic level information on how to manage your credit. What Karen has discovered is that there are dozens of places from where she can get copies of her credit reports and dozens that offer services that will help her to manage her credit. Karen is confused about 2 things: where should she get her credit reports from and exactly what should her goals be when managing her credit? What she doesn’t realize yet is that she is asking probably the two most important questions she can ask with respect to credit management; Where should I get credit reports from and what are my goals? So, Karen embarked on what she thought would be a simple excursion to find out the best place to get her credit reports. What she didn’t realize is that she was about to essentially walk down the soft drink aisle at the local grocery store. She found 29 options to choose from all offering their angle on why they have the best product to buy. At first Karen was tempted to just pull her own credit reports from the credit union’s loan center and be done with it. But, after some discussion about what impact those credit inquiries would have, she decided to get them from the legitimate consumer channels. The credit union inquiry could lower her credit scores and have an adverse impact on her ability to get and maintain loans, insurance, utilities and even employment. She got the picture that this wasn’t a decision to be taken lightly. Never ever get your credit reports or credit scores from a buddy at a bank, mortgage company or car dealership. It will look like you are applying for a loan with them. The first thing she needed to do was sit down and make a list of exactly what she wanted to accomplish by obtaining her credit reports based on where she is at this time in her life. Karen is young and, as such, is just starting on her journey down the consumer credit path. If she makes the right decisions now she’ll enjoy easy approvals at the best interest rates. If she makes the wrong decisions now she’ll pay for it for years to come in the form of credit denials or higher interest rates. After some discussion, Karen’s final list looked like this… “What do I want to see from my credit reports?”
So now that she had her objectives down on paper it was time to start evaluating her options in order to make the most informed decision about where to get her credit reports. Her OptionsAfter talking to Karen it was pretty clear that price was a concern and that she didn’t want to spend a lot of money getting her credit reports or the tools needed to manage them, unless of course she felt that they were worth the price. We started with the free options or at least some that claim to be free... “This was a good one” This site is sponsored by the credit reporting agencies as part of the requirements of FACTA (The Fair and Accurate Credit Transactions Act of 2003). FACTA requires that every consumer in the U.S be given one free copy of all of his or her credit reports each year. Karen could immediately get all of her credit reports for free. This site will give Karen the following…
If you ignore the attempts to cross-sell fee based services you’ll get a really good start here. This site is legitimate and your information will be delivered in a secure environment. “But you have to be careful” In an attempt to subsidize their free report, Equifax tries to charge the consumer $6.95 for their FICO score as part of their free report. This is the same exact score that lenders pay a few cents for when they pull your credit file. TransUnion also tries aggressively to sell you their non-FICO score for $5.95 (twice during checkout) when you try and claim your free report. This score, while less expensive than the FICO score from Equifax, is worthless because lenders don’t use it. In fact, TransUnion even tells you this in their fine print. From the TransUnion Website: “Our Credit Score may not be the same credit scoring model used by a lender when making a lending decision.” In “non-lawyer” language this means that the credit score you are buying is not the same credit score used by lenders. Keep in mind that this site and the free credit reports you can get from it are mandatory and that the credit bureaus begrudgingly sponsor it as a requirement of federal law. They will lose millions of dollars each year because of this web site. As such, you should expect to get the hard cross-sell when claiming your free reports. “These were bad because they were deceptive about the fees”
www.freecreditreport.com
These sites are owned and operated by Experian, one of the three credit reporting agencies. They spend millions of dollars each year advertising these sites on television and on high profile web sites. Unfortunately, the credit report you get on these sites is hardly free. Beside the fact that the report marketed on this site is from Experian so it’s missing your two other credit reports, the only way you can claim your free credit report is by signing up for a 30-day trial of a credit monitoring service AND give them your credit card information. If you forget to discontinue the membership before the deadline then your credit card will be billed between $119 and $155 each year to cover the cost of the monitoring. Of course this is clearly explained in the smallest print possible on their site. And, they don’t do a very good job letting you know that “your 30 day trial is about to expire and your credit card is about to be charged.” This is called negative option marketing or the “breakage model.” They know that some people will cancel their service within 30 days and get away with a free credit report. But, Experian also knows that enough people will forget to cancel their service and can make enough money on those people that it’s worth giving away their credit reports for free to anyone who signs up. This method of marketing is very controversial and at the time of this article Experian was in the process of settling with the FTC for their deceptive marketing practices. They also agreed to make changes to their site to make it more evident that consumers were signing up for a fee based service in exchange for their free credit report. Karen decided that she should avoid these options. A good call to be sure. The 2 reasons were that she can’t get all three of her credit reports and she felt that the deceptive way they market on the site reflects poorly on their reputation. Now we’ll move on to her fee based options. “These are ok if you can avoid the cross selling and be sure to buy the right product”
www.equifax.com
These are the websites of the three credit reporting agencies. Here she is able to get information on how to claim her three free credit reports by being redirected to www.annualcreditreport.com. She is also able to buy all three of her reports independently and other services such as scores, debt analyses and identity theft monitoring. The advantages are that she is guaranteed to get all three of her reports directly from the same sources that lenders get their credit reports from. This was important to Karen and it might be worth her while to manage three separate “memberships” at each credit reporting agency. She would also get free access to a significant amount of credit education content and tools designed to help her better manage her credit. These seemed like pretty good options. Now let’s take a look at her other “fee-based” options. The new reality is that getting free access to your credit reports, provided for by federal law, has made it impossible for companies to sell the information without any sort of value added services or tools. We’ll investigate some of her options and what you get with each.
www.equifax.com
Look familiar? They should. These are the same websites that we reviewed in the last section. All of these sites will also gladly sell you your credit reports and other services for a fee. The questions are what are these services, how much do they cost and are they worth the price? Let’s review:
Then there’s www.myfico.com . myFICO is the Fair Isaac consumer website.
Then there’s www.choicetrust.com . ChoiceTrust is ChoicePoint’s consumer website. ChoicePoint is the company that most insurance companies use when you apply for auto or homeowners insurance. The reports you get here are a little different from the reports you get from the credit bureaus. Here you can get your CLUE reports. These are the records of your insurance claim history, both auto and homeowners. You can get a score here but it’s not your credit score. Rather it’s your insurance score. This information is a little less valuable than your credit reports but it’s still free so you should spend the time to get it. All of the aforementioned sites are relatively easy to navigate and the buying experiences are moderately user friendly. The one necessary evil of all these sites is the process of authentication. Since all of these sites are public websites that sell your highly confidential information it is imperative that each of them have a process whereby you can verify that you are who you say you are. This authentication will be a set of multiple choice questions pulled from your credit reports such as:
If you don’t have the answers to these questions you will likely fail the authentication process and won’t be able to get your credit or insurance reports. Her Choices“I was overwhelmed” After going through only 5 or 6 options Karen was overwhelmed. There were so many choices, most of which seemed to offer what she was looking for based on the goals that she set out before her search began. After reviewing and discussing we identified the following information that she wasn’t aware of: There are only 3 credit reporting agencies which means that all of her credit reports would come from 1 of 3 places regardless of where else she went to claim or buy them. After she learned that it made the decision very easy. She settled on the following: First she went to www.annualcreditreport.com and claimed her 3 free reports. The fact that they were free was too nice to pass up. And, since the three national credit reporting agencies sponsor the site she felt comfortable about the security. But she still wanted all three of her credit scores and they were not available on this site. After searching she found numerous options, which would sell her a credit score but being from the financial services industry she was hesitant to buy a score unless it was the industry standard FICO credit score. After some research she settled on www.myfico.com . Her scores were expensive and she was forced to buy her credit reports again but she wanted her scores so she spent the $44.85 begrudgingly. She also claimed her free CLUE reports from ChoicePoint’s website www.choicetrust.com . They were free so, again, it was too good of an offer to pass up. What Did She LearnKaren learned that there are tons of options when it comes to getting her credit reports. And she learned that some of the options are not as good as others. In fact, some of them are downright bad. What we can all take away from Karen’s experience is that a little research can go a long way. This industry, the “direct to consumer” sale of credit information, is a several hundred million dollar business all built around information that is, essentially, free to you as guaranteed by Federal law. Her key was to sift through all of the choices and identify the good ones while avoiding the bad ones. SummaryWe all need to review our credit reports several times each year. We need to review them for accuracy, to empower ourselves by knowing our credit scores and by verifying that we have not been the victim of identity theft. The Federal Government says that we deserve one credit report each year from each of the three credit reporting agencies. Your job is to claim all of them!
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