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The Problem with Free Credit Reports

Marketers and advertisers learned long ago that no other word sells more than Free. Sell, free, isn’t that an oxymoron. Technically no, but it is an apparent contradiction and the terms do appear to cancel each other out and yet the fact remains that the word free is a great marketing word

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Fat Free, Preservative Free, Free Shipping, Buy One and Get One Free, Order Now and it’s FREE Just Pay Shipping and Handling, Free, Free, Free! Free is such a powerful word that the Federal Trade Commission even has a 1268 word guide Concerning the Use of the word “Free”. Free is an important advertising word because it provides such a rich return for marketers.

“Free-99”

We’ve all been exposed to the offers on TV, radio, the internet in pop-ups, pop-unders, banners, emails and in helpful advertorials espousing the benefits of credit monitoring. Google free credit report and you will have almost 600,000 links returned. Free credit reports are a very big business.

The cost of the various free credit reports runs from $1 to $15 – $50 per month or more. That’s right, “free” costs money. For example FreeCreditReport.com, the site that advertises with the guys in the band charges a $1 fee for you free credit report. Buried in their 12,500 word terms and conditions is the explanation that it is required in order to validate your credit card.

Huh? Why do they have to validate my credit card for a free report? The fact is that you are not signing up for a free credit report you are signing up for a free 7 day trial membership and the minimum cost of the membership is $19.99 per month, unless you upgrade in which case, depending on the extra features you select your cost will be higher.

The burden is on you to cancel the free trial because when you sign up you are agreeing to a monthly subscription in which the first week of your subscription is free. Sound confusing, well it’s confusing for a reason, the company; Experian does not make money giving things away for free.

They’re not alone

Experian, one of the three major credit reporting agencies, is not alone in marketing less than free credit reports as free. They are just the most aggressive. TransUnion and EquiFax both offer free reports along with paid subscriptions.

Some of the free credit report companies like Credit Karma operate on the share and share alike model where in exchange for a limited information version of your credit report you agree to share your contact information with dozens of marketers who know you have an interest in your credit and are ready to exploit that knowledge.

There are rules

The Federal Consumer Protection Bureau website provides guidance about when and from whom you are entitled to a free copy of your credit report. A good example is when you have been denied credit, such as turned down for a loan or credit card. When a lender informs you that you were denied because of adverse information in one or more of your credit reports you can request a free copy of the reports that were used to determine your credit worthiness.

Utah State University’s IT department  has put together a nice web page that has links to several sites that provide handy charts listing various credit reporting and identity protection services which includes overviews of their free trials and actual costs so you can quickly compare a number of offers.

Next Advisor provides a list of credit monitoring services that includes information about which agency’s credit reports are included and the cost. Fight Identity Theft has a similar comparison chart for identity theft protection and prevention companies.

There can be only one

Federal law says that consumers are entitled to a free copy of their credit report once a year regardless of whether they have been denied credit. As part of the Fair and Accurate Credit Transactions Act (FACT Act) consumers may obtain a free credit report once every 12 months from each of the three nationwide consumer credit reporting companies. There is only one official website where the reports can be ordered, annualcreditreport.com.

Beware of impostors, especially websites with domain names that contain the word credit report. A catchy domain name that sounds official or professional is not an adequate reason to provide your personal information and assume you will be treated fairly or honestly.

If after you receive your credit reports you find fraudulent entries you have the right to dispute those items and to request that they be removed from your report. The FTC provides a sample letter that you can customize to request that errors and fraudulent entries be removed.

Photo Credit: Brad Stabler

Frank Addessi Born and raised in the center of the known universe, Brooklyn NY, and currently hiding out in the bucolic hills of northeast Pennsylvania writing about personal finance. His expertise includes personal loans, credit cards and retirement. It's not easy living the American Dream but someone has to do it!
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