Despite the popularity of mobile apps promising easy access to credit information, obtaining free, bona fide credit scores remains a challenge for consumers, according to a new analysis.
Consumer Reports, which published an analysis of five popular credit apps on Thursday, found that some of the digital tools may provide credit scores that differ from the ones a lender would consider, limiting their usefulness.
In addition, Consumer Reports said, some apps charge for the scores, and some also charge users for bundles that include their credit reports — even though consumers are legally entitled to receive their reports annually, at no cost, on a special website. (During the pandemic, the three major credit bureaus — TransUnion, Experian and Equifax — have been offering consumers free weekly access to their reports.)
Credit reports are records of your loan and payment history, maintained by the three bureaus. Credit scores are three-digit numbers based on the credit reports and calculated using various formulas developed by companies like FICO and VantageScore. The scores range from 300 to 850, with 670 or above considered good. The average FICO score is 716.
Lenders use the scores to determine if you’re likely to repay a debt and what interest rate to charge you. Consumers aren’t currently entitled to free credit scores, except in certain situations.
The new analysis highlights the drawbacks of the current credit system, said Syed Ejaz, financial policy analyst for Consumer Reports. Credit scores affect a person’s ability to buy a house or a car, or even to get a job or rent an apartment — but it’s hard to know just what your score is without paying for it.
“These are superconsequential decisions in a consumer’s financial life,” Mr. Ejaz said. “Consumers should be shown these scores for free.”
John Ulzheimer, a credit industry expert, said a score from a credit app was unlikely to be the exact one you would receive from a lender, since there are multiple versions of credit scores depending on the credit bureau providing them and the software version used. But even a general score can put you in the ballpark of what type of score to expect from a lender, he said.
“It will give you an idea of what your score would be,” Mr. Ulzheimer said, so can be helpful, particularly if it is free.
A Consumer Financial Protection Bureau study in 2012 found that most consumers who scored well under one scoring model generally scored well on other models. But a “substantial minority” could see large variations, it said, so consumers “should avoid relying on scores they purchase as the sole basis for assessing their creditworthiness when making important decisions about obtaining credit.”
The Consumer Reports review examined the five most popular credit scoring apps according to download data. In addition to apps offered by Experian and TransUnion, the report considered apps from Credit Karma, Credit Sesame, and myFICO. (An offering from Equifax didn’t meet the study criteria, Consumer Reports said.) Researchers downloaded the apps early this year, and rechecked them in the spring.
The myFICO app provided broad access to industry-specific credit scores, like scores used for credit cards and car loans. The app is offered by the Fair Isaac Corporation, which developed the FICO score. The company says there are multiple versions of FICO scores, which it says are used in “90 percent” of lending decisions.
But myFICO charges fees for its scores, starting at $19.95 a month for a “basic” package that includes a score and an Experian credit report. A “premier” package, including monthly FICO scores and reports from all three bureaus, is about $40 a month. FICO didn’t respond to a request for comment.
Greg Jawski, a FICO spokesman, said the myFICO app offered features like customized information and simulations to help users better understand their score. FICO also offers an “open access” program, which lets lenders share with consumers, for free, the scores they use in credit decisions.
The other apps vary in what they charge. Credit Karma doesn’t charge for scores or reports. Credit Sesame, which also offers VantageScore, doesn’t charge for scores but does charge for a package that includes credit reports from all three bureaus.
Experian offers a basic FICO score and an Experian credit report at no cost, but charges for an expanded package that includes, among other things, additional scores and reports from the other credit bureaus. TransUnion said its Score & Report app charges about $20 a month for daily access to a TransUnion VantageScore and credit report, plus other information.
VantageScore, a lesser-known competitor to FICO, is a joint venture of the three big credit bureaus. Its use has been growing, according to a consultant’s report prepared for the company. But it’s generally not used for home loan applications, because federally backed mortgages are required to use FICO scores.
Credit Sesame said in an email that it believed VantageScore was a “more inclusive” scoring model, generating scores for some 40 million consumers deemed “unscoreable” by other models because they are new to credit or have a limited credit history.
Adrian Nazari, chief executive of Credit Sesame, said that its users mostly wanted to understand and improve their credit scores, and that VantageScore was a “great educational tool.” He added, “We offer so much more than a score.”
The overall result, Mr. Ejaz said, is a sometimes confusing mix of offerings that may not provide what consumers expect, and often come with sales pitches for loans and credit cards.
The apps may also raise privacy concerns, since they collect “substantial” private consumer data, the report found.
Here are some questions and answers about credit scores:
How can I improve my credit score?
Regardless of the scoring model used, there are steps you can take to improve your score. These include paying your bills on time, keeping your card balances low in relation to your overall credit limit and limiting the number of loans and credit cards you have open.
Are there plans to require credit scores to be offered free?
Proposals in Congress, including H.R. 4120, the Comprehensive Credit Act of 2021, would provide free access to the credit scores that lenders use.
Can I get a free credit score from my credit card company?
In some cases, yes. Cards issued by big banks and American Express often offer holders access to free credit scores online. Discover Card, for instance, says it offers free monthly FICO scores from Experian. But here again, the scores may not always reflect specific scores that a lender would use, depending on the type of loan you are seeking. Check with your bank or card issuer for details.
Chi Chi Wu, a lawyer with the National Consumer Law Center, said getting a free score from your lender or credit card company was “definitely preferable” to paying for one from an app. It’s free, she said, and because you’re already a customer, you’re not divulging any more personal information than you already provided to get the card.