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As many consumers have discovered the hard way, the free credit reports offered in TV ads and on the internet are usually anything but. That nice-looking, guitar-strumming guy dressed up like a pirate on the commercials for Freecreditreport.com may croon a sweet tune of free credit score reporting. However, consumers who sign up for the service often unawares find themselves roped into memberships for costly credit monitoring services.
As of April 1st, however, the Federal Trade Commission has put a ban on misleading advertising surrounding consumer credit reports, requiring companies that advertise ‘free’ credit reports to clearly disclose the terms of their service.
This one is no April’s Fools’ joke; it is one of the provisions of the new credit card rules, which have been phasing in over the past year. The new rule aims to rein in deceptive promotions and ensure that consumers can easily access their official, free annual credit report.
Under the new guidelines, companies must prominently state that a (truly) free annual credit report is available through the official website, AnnualCreditReport.com, or by phone at (877) 322-8228. All consumers are entitled to one free annual credit report from each of the three credit bureaus, Experian, TransUnion, and Equifax. The free credit report does not include credit scores, however, which consumers still have to pay to get.
In addition, credit reporting companies must provide prominent disclosures revealing what services are really being offered—and at what price. Even the authorized AnnualCreditReport.com will have to restrain from peddling additional products and services to consumers until after they have received their annual file disclosure.
While the new legislation requires companies to disclose the real cost of “free” credit reports, it will not lower the costs associated with obtaining a copy of your credit score or a copy of your credit reports above and beyond the mandated complimentary ones. Expect to pay $8 or more for a copy of your credit score from each of the three credit rating agencies. If you wish to pull your credit report more than once a year, expect to pay $15 or more for each additional report. (However, consumers who have been turned down for a loan or credit card application are entitled to a free copy of the credit report from the credit rating agency providing the information on which the decision was based).
So, do the new disclosure rules really provide greater consumer protections? Yes and no. On FreeCreditReport.com, for example, the terms of the service is now displayed in small font on top of the home page: When a consumer pays $1 for a copy of their credit report and credit score, they begin a 7-day trial membership in the service, which will cost them $14.95 a month, unless they cancel their membership within the 7-day trial period.
The most prominent parts of the site, however, still advertises that consumers can check their credit report for $1 and get their credit score for free. So consumers who happen to miss the ‘warning’ text at the top of the home page, still might not realize what the real terms of the service are—until the $14.95 monthly charges appear on their credit card statement.
In short, while the new FTC rules are a step in the right direction, it’s still Buyer Beware when it comes to ‘free’ credit reports or credit scores. For those seeking a genuinely free option in addition to the free credit report at AnnualCreditReport.com, check out the free FICO score estimators on the web, such as Bankrate.com’s FICO score estimator, which provides an excellent credit score approximation.
Getting an idea of what your credit score is particularly useful if you’re contemplating applying for a mortgage or other type of loan. In addition, make sure to take advantage of the free copy of your credit report available once a year at AnnualCreditReport.com. A quick credit check can uncover potential identity theft by revealing unauthorized activity.
