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Why Do Companies Give Away Free Credit Scores?

Kimberly Rotter

There is no law that entitles consumers to free credit scores. But in 2013 the Consumer Financial Protection Bureau (CFPB) – the nation’s financial watchdog tasked with protecting consumers – began urging banks and other institutions to provide credit scores and other educational information to consumers.

Credit Sesame beat them to the punch when it started providing consumers with free access to their credit scores in 2010. Knowledge is power. You can make the best financial decisions if you know where you stand. Knowing where you stand also tells you where you need to go.

Weren’t credit scores always free?

No. Until just a few years ago, credit scores were guarded secrets held by the credit scoring agencies, available only for a fee. Although we are each entitled to a free credit report every year from each bureau, those reports do not, even now, come with free credit scores. Since there was no legal obligation to provide scores, they were treated as a commodity and offered for sale. The only way to get a free credit score used to be to ask a lender to share it with you after they pulled your credit.

What’s the difference between all the credit scores out there?

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We each have dozens of credit scores. Each credit score that you have represents a moment in time and reflects the data that is in your credit file. You have multiple credit files, including one each from the three largest consumer credit reporting agencies – Equifax, Experian and TransUnion. Not all creditors report to all three agencies, so the information in your files can (and usually does) differ.

Furthermore, there are many different ways to calculate your score. These are called algorithms or scoring models. They are complex formulas that examine the data in your file in order to determine how likely you are to repay future debts. These scoring models change over time. The most recent FICO® scoring model is the FICO® Score 9.

Algorithms are also fine-tuned based on the industry that’s asking for it. That means that if you apply for an auto loan, for example, the lender will probably see a credit score that applies more weight to your history with auto loans.  Most auto lenders use FICO® Auto Score 2 or FICO® Auto Score 8. The lender must purchase your score, and is not required to purchase the most current scoring algorithm. You can apply with two auto lenders who get two different scores on the same day.

Similarly, mortgage lenders and credit card issuers get scores tailored to those types of credit products.

Free credit scores are consumer scores or educational scores. They are designed to give you an idea of where your credit stands, but they may not match up exactly with the scores lenders see. Consumer credit scores can be based on FICO® or VantageScore® scoring models, and provided by any of the credit reporting agencies.

Confused? Don’t worry about the details. What matters more is the range into which your scores fall. In general, if you have good credit, the score will be in the good range no matter which score you see. A range of scores is not necessarily cause for alarm.

Who offers free credit scores and is it my ‘real’ score?

Many companies and financial institutions offer free credit scores, including Credit Sesame. The Credit Sesame free credit score is a TransUnion educational score, based on a VantageScore® scoring model. It may differ from the score a lender sees. We provide it so that you can take hold of your financial reins and gain access to better, more affordable credit products.

You may also have access to a free credit score from your bank or credit card issuer. These are also educational scores and may differ from the score a lender sees, even if your potential lender is the same institution that provides the free score.

How do companies make money giving free credit scores?

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Any company that offers you a free credit score also offers profit-generating products for sale. That doesn’t mean the credit score isn’t valid. In fact, the opposite is true. The free credit score provider is in a unique position to offer the right financial products to you based on your credit profile, products that could save you money over time or provide other benefits.

Credit Sesame analyzes debt daily. Based on your credit standing, we may show you lenders that can offer you a lower interest rate than you currently pay. We only show you offers for which you’re likely to be approved. If you click the offer and are approved, Credit Sesame earns a small commission. This commission is paid by the lender, not by you.

At the end of the day everyone wins. You get a better deal, potentially saving tens of thousands of dollars over the life of a loan, the lender gets a new customer, and we earn a paycheck for helping you improve your finances.

What’s the advantage to using Credit Sesame?

Credit Sesame’s free credit score is a step above your bank’s free score because we also provide a free credit report card, $50,000 in free identity theft insurance, free credit monitoring alerts and other benefits in addition to a vast library of credit education.

Checking your own credit through Credit Sesame never hurts your score.

Credit Sesame never sells or gives away your personal information.

What you need to know about your free credit score, in a nutshell

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Know your standing. If you know where you stand, you can evaluate credit offers in order to choose the best one. You can also work toward improving your credit standing in order to save even more money.

Don’t pay for a credit score. All of the big credit bureaus offer scores for sale. Those scores are also educational and no better than the free score offered by Credit Sesame. Indeed, in early 2017, two of the big three credit bureaus were fined $23 million for deceiving consumers by telling them that they were purchasing the same scores lenders used.

Check your credit reports regularly. Take advantage of your right to receive free annual credit reports (via AnnualCreditReport.com) from each of the major credit reporting agencies, and investigate any credit monitoring alert you receive from Credit Sesame. Errors and identity theft can lower your score, and that could cost you money.

Pay attention to your credit report card. We’ll tell you exactly what’s holding your credit score down so that you can plot your course to better credit.

Pay attention to Credit Sesame suggestions. The offers presented to you on your Credit Sesame dashboard are chosen because they can save you money.

The free credit score industry has grown over the past seven years. Creditors have finally figured out that credit knowledge creates a better customer base. Even though consumers with poor credit pay more, consumers with great credit are more likely to repay their debts and are therefore more desirable as customers. Knowledge is power. Take it.

Credit Sesame is your advocate. We empower you with your credit score so that you can achieve your financial goals.

You can trust that we maintain strict editorial integrity in our writing and assessments; however, we receive compensation when you click on links to products from our partners and get approved.
Published February 23, 2017
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