Personal Credit Data: Defining “Free”

Where can you go to obtain a free personal credit report in the United States?

Until last week, you might have logged onto FreeCreditReport.com, but then you might have noticed an important requirement. Experian, the firm that operates the FCR web service, indeed offered to send consumers free personal credit reports, but only if they agreed to sign up for a $14.95 per month credit monitoring service called Triple Advantage.

However, last week, Experian decided to clarify and modify their terms. But they didn’t eliminate the Triple Advantage enrollment requirement; instead, they started charging $1 for their credit reports. Interestingly, they also promised to give the proceeds to a specific charity.

Why did Experian suddenly decide to adopt these new policies? And how can they continue to refer to their service as “free” if they are now charging $1 for it?

Cat and Mouse

Experian is one of the three major credit agencies in the United States. Experian, as well as Equifax and TransUnion, strive to maintain credit files on every credit consumer worldwide; Equifax alone maintains records on over 400 million consumers around the world.

In a sense, the credit reporting industry embodies a game of cat and mouse, one in which creditors chase down nonpaying customers and then report their unpaid debts to credit agencies. The agencies sell this information to other creditors, who consider it while deciding whether to extend credit to the same consumers.

But consumers are engaged in this game as well, and their rights are protected by the largest cat of them all: the Federal Trade Commission of the United States. The FTC has interpreted and enforced the Fair Credit Reporting Act by requiring all three major credit agencies to provide free credit reports to all American consumers upon request as frequently as every twelve months.

Clearly, by mandating that the credit agencies give away their primary service for free every twelve months, the FTC has made it extremely difficult for the firms to sell the same service to the same customers. Thus, Experian was forced to redefine its consumer service in a creative manner.

Pirate Hats!

Experian thus launched a playful series of commercials, featuring an amiable but hapless young musician who struggled through a series of misadventures because of a poor credit rating. His first commercial appearance featured him wearing a pirate hat, playing music in a third rate seafood restaurant, and subsequent commercials followed him as he struggled to survive in cheap apartments, drive in old automobiles, talk on prepaid mobile phones, and exhibit other lifestyle characteristics of consumers with poor credit histories.

But these commercials didn’t direct viewers to the FTC’s mandated web site. And they didn’t inform viewers that they could request and receive a free credit report with no other obligations. Instead, they offered viewers a free credit report if they agreed to sign up for the Triple Advantage tracking service.

Governmental authorities eventually stepped in and asserted that a mandatory sign-up requirement negated the free nature of the report itself. Experian accurately responded that they allow consumers to opt out of the Triple Advantage service within seven days of ordering it without incurring any fees.

But the government wasn’t satisfied with their policy, and thus Experian decided to counter any accusations about selling credit reports under false pretenses by clearly charging $1 for each report. And to emphasize the point that they were only doing so under pressure from the government, they declared their intention to donate each dollar to charity.

Scores vs. Reports

So does this mean the end of the television commercials with the pirate hats? Not at all! Experian has achieved great success with its free offer strategy, and thus has decided to launch a new service: FreeCreditScore.com!

A credit score is simply a number that each credit agency assigns to each of its consumer accounts, a summary statistic that reflects the strength of each consumer’s creditworthiness. Because vendors generally do not have time to analyze voluminous credit reports, they often only purchase credit scores from the agencies. Because credit scores do not appear on credit reports, consumers who feel compelled to monitor their credit histories on an intensive basis often need access to both their reports and their scores.

So Experian is now giving away credit scores for free, but only to consumers who sign up for Triple Advantage as well. And to address the FTC’s continuing concerns about mandatory sign-up requirements, Experian decided to offer these new customers a seven day opt-out period too.

And thus the Free Credit musician will play on in Experian’s television commercials! Nevertheless, educated consumers must keep in mind that different web sites offer different terms. The FTC mandated site does indeed provide free credit reports, but those reports do not contain credit scores. On the other hand, Experian and its two fellow credit agencies continue to maintain their own proprietary sites that provide scores along with reports, but only on terms that may involve sign up requirements.