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CR finds credit score apps can come with hidden costs & risks: Unreliable scores, unnecessary charges, privacy risks & questionable promotions

Consumer Reports urges policymakers and app providers to adopt reforms, offers tips for consumers 

YONKERS, NY – A new Consumer Reports (CR) investigation released today finds that popular apps that provide access to credit scores may not offer all of the benefits users expect, and they can come with hidden costs and risks that people may not foresee. CR is calling on app providers to improve their offerings and is urging Congress to ensure that Americans have free, unlimited access to credit scores and reports.

Americans are legally entitled to access their credit reports for free once per year, but they do not have a similar right to their credit scores, except under limited circumstances. In response, a number of companies have created apps that provide access to credit scores and promise to help users improve their credit standing.

Consumers who use the apps have told CR that they like having 24/7 access to their credit information so they can track it and catch unauthorized use of accounts. Some users have raised concerns about the accuracy of their scores, the annoyance of near-constant marketing – including being pushed to sign up for additional credit rather than decrease debt – and the risk that their information will be sold to other companies or stolen in a data security breach.

“Most of the apps we examined offer credit scores that aren’t typically used by lenders and come with other drawbacks, like unnecessary costs and privacy risks,” said Syed Ejaz, financial policy analyst for Consumer Reports. “No one should have to pay extra and trade away their personal data to private companies just to access their own credit information. Congress should give Americans unlimited access to their credit reports and reliable credit scores at no charge so they have an accurate picture of their credit standing without incurring extra costs.” CR has launched a petition urging lawmakers to pass these reforms.

Consumer Reports examined five popular apps that give consumers access to credit scores: Credit Karma, Credit Sesame, Experian Credit Report, MyFICO, and TransUnion: Score & Report. CR set out to identify the specific credit information these apps provide to users; document the fees they charge; assess the services’ business models; and evaluate their privacy and data security practices.  Consumer Reports found that:

  • None of the apps provide users with free access to credit scores that most lenders use to evaluate consumers’ credit worthiness. MyFICO and Experian Credit Report charge users for access to the “industry” credit scores lenders typically use to make lending decisions.  MyFICO charges $19.95 per month and Experian charges $19.99 per month, or more than $200 annually.
  • Four of the five charge for credit reports consumers are entitled to access for free once each year at annualcreditreport.com: Credit Karma, Credit Sesame, Experian Credit Report, and TransUnion: Score & Report. Since the start of the COVID-19 pandemic, the major credit reporting agencies have provided free weekly access to credit reports through this website and plan to continue doing so through April 20, 2022.
  • All five collect a substantial amount of private information from users and appear to share data beyond the parties named in their privacy policies. The companies use this data to develop detailed user profiles for marketing products or services to users. This extensive data collection may not have immediate benefits for consumers, and could pose a privacy risk, especially in light of numerous data breaches at credit bureaus and data brokers over the years.
  • Four of the five promote financial products that may not be in users’ best interests: Credit Karma, Credit Sesame, Experian Credit Report, and TransUnion: Score & Report. These apps routinely promote other financial products and services as personalized “advice” or “recommendations” for raising credit scores or saving money but disclose in the fine print that the services aren’t necessarily in users’ best interests. The app providers make money when users sign up for the promoted financial services and stand to earn the most from the deals that are listed most prominently.
  • All five services require users to agree to mandatory arbitration clauses that limit their ability to sue the companies in court in the event they are harmed.

Consumer Reports is supporting the Comprehensive Credit Act, which would provide consumers free access to credit scores that lenders use, and the Protecting Your Credit Score Act, which would establish a secure portal where consumers can access credit reports and scores for free an unlimited number of times. In addition, CR is urging Congress to ban arbitration agreements in financial product and service contracts and pass national privacy legislation that creates a strong floor of protections for consumers and requires strict data security practices for companies.

In the absence of congressional action, Consumer Reports is calling on app providers to offer free access to credit scores lenders use and to direct users to access free credit reports through annualcreditreport.com. CR is urging providers to remove mandatory arbitration clauses from contracts and to only promote products and services that are in the best interests of users. App providers should clearly disclose the third parties with which users’ data is shared or sold.

What Consumers Can Do:

Skip the apps to protect your privacy and avoid being bombarded by ads. Some people may not mind a company collecting data about them for an easy way to keep track of a credit score. But keep in mind that the score may have limited value and you’ll be heavily marketed to.

Look for free credit scores elsewhere. Check to see if your bank or credit card offers you access to your credit score. Although these free scores are likely not the ones mortgage lenders use, knowing them could help if you want to apply for a credit card or auto loan.

Get free credit reports. Don’t pay for credit reports that you can already get for free. Instead, check your credit report weekly at no cost through AnnualCreditReport.com. 

Correct errors in your credit report. Your credit score is only as accurate as the credit report it’s based on. But, as an earlier CR investigation found, those reports often contain errors.  If you find errors, file a dispute. Read more about how to fix mistakes in your credit reports.

Don’t rush to sign up for credit cards or other offers based on ads from the app. Instead, take your time to compare all types of credit cards and their terms.

Consumer Reports’ investigation of credit score apps is part of a broader initiative to monitor, evaluate, and strengthen consumer protections in the burgeoning digital financial marketplace,  made possible, in part, by a grant from Flourish Ventures’ fund at the Silicon Valley Community Foundation. The grant will help support CR’s efforts to partner with consumers, industry, and policymakers to secure the business practices, standards, and laws necessary to build a fair and inclusive financial marketplace.

Michael McCauley, michael.mccauley@consumer.org, 415-902-9537