Why Credit-Rated Apps Aren’t Great (and What to Use Instead)
Credit rating apps are a popular way to keep track of your credit ratings, but they really aren’t that great. According to a recent analysis by Consumer Reports , these apps use ratings that are different from those actually used by lenders, they clean up unnecessary amounts of personal information and offer you additional credit monitoring information that you can already get for free.
What You Should Know About Popular Credit Assessment Apps
Consumer Reports reviewed five popular apps – Credit Karma, Credit Sesame, Experian Credit Report, myFICO, and TransUnion: Score & Report – and found that:
- Four out of five provide users with credit ratings that differ from those lenders actually use to assess consumer creditworthiness (Credit Karma, Credit Sesame, Experian Credit Report, and TransUnion: Score & Report).
- Four out of five often charge users to access their credit reports – information that consumers are legally entitled to receive for free (Credit Sesame, Experian Credit Report, myFICO, and TransUnion: Score & Report).
- All five appear to collect more personal data from users than the apps need to perform their basic functions, and they all seem to exchange data beyond the parties specified in their privacy policies.
How are the credit ratings used in applications different from the credit ratings used by lenders
The free version of these credit rating apps usually only offers one credit rating, although there are dozens of versions available. In the case of apps surveyed by Consumer Reports, three apps use VantageScore credit scores rather than FICO scores, which are used in 90% of all lending decisions. MyFICO does offer an array of FICO scores used by lenders, but you have to spend $ 20 per month to access them. Experian Credit Report provides the more commonly used FICO 8 score for free, but they charge you $ 20 per month to access other FICO scores.
However, all of this information may be of limited value. Of course, you can pay to track down only a few of the dozens of credit ratings available, but that doesn’t necessarily tell you which lender can use to determine your creditworthiness. (There are dozens of FICO scores used for various purposes, such as mortgages or car loans.)
If you are worried about lowering your credit rating, it may be easier to focus on good credit behavior by keeping an eye on your credit reports from the major bureaus Equifax, TransUnion, and Experian, which these credit ratings are based on. After all, a credit rating just gives you a three-digit number, but it doesn’t tell you why your credit rating has changed.
Even the free versions of this app have trade-offs.
To use the free version of these apps, you still need to give these companies permission to collect your personal data , including data from other sources outside of the app. According to Consumer Reports, this allows these companies to create a profile about where you live, work, communicate and shop. For example, Credit Karma’s data collection policies include information from “local business reviews or social media posts,” and the MyFICO agreement grants them permission to access “census data or real estate records.”
In addition, these apps will also try to sell you paid subscriptions or other financial products that Consumer Reports describes as “not necessarily user-friendly,” such as credit reports, which you can already get for free.
Where to get credit ratings and reports for free
Many banks or credit card companies already provide FICO scores on their websites or apps. You are also entitled to a free annual credit report from each credit bureau, which can be found on this website . (During the pandemic, these rules were relaxed: until April 2022, you can get a report from each bureau every week for free.) Otherwise, the best way to protect your credit rating is through good credit behavior. Read more about this in this Lifehacker post .