After nearly a decade of bickering, Congress in 2003 finally granted every American the right to a free peek at their credit report each year. Now dozens of Web sites – many of them either owned by or affiliated with the major credit bureaus -- are hard at work tricking people into paying for that free report.
Search for "free credit report" on the Web and you will find pages and pages of Web sites offering free credit reports. All but one, however, charge for those "free" reports and place all sorts of conditions on purchases. One site, for instance, requires enrollment in pricey credit monitoring service, which can only be canceled online after precisely 23 days. Another automatically enrolls users in a discount travel service. And some hint that the real free credit report site established by Congress -- AnnualCreditReport.com -- isn't all it's cracked up to be.
"Remember, all free credit reports are not created equal," says FreeCreditReport.com, which is run by credit bureau Experian.
That's an interesting statement, because AnnualCreditReport.com also is run by Experian, along with the other two credit bureaus, Equifax and Trans Union. It sounds as though Experian is saying the credit report it sells is better than the one Congress said it must give away for free.
Consumers Union's Web Watch, run by the same folks who publish Consumer Reports magazine, recently commissioned a study of the "free" credit report Web sites. Robert Mayer, a professor at the University of Utah and author of the study, came away with the opinion that most of the sites are "sleazy."
"You get the feeling that they said, 'We know we have to give these things away but we're going to do everything we can not to do that," Mayer said.
Though the sites charge various amounts for their products, they liberally use the word "free" to advertise their wares. Some examples:
Mayer focused on the 24 sites that come up most often on search engines, and painstakingly scoured them. He found the word "free" a whopping 312 times -- an average of about 13 times on each page.
Six products in one!
Part of the lure of the sites is the promise that consumers can get three credit reports and three credit scores -- essentially six different products -- all at once. While credit reports can be had for free, thanks to Congress, credit scores still cost money. Visitors to AnnualCreditReport.com can order their scores there for $6-8 while getting their truly free reports. Total cost for all six items is about $22.
At the "free" sites, these things cost quite a bit more. At NationalCreditReport.com, three scores and three reports costs $39.95. Experian, on its Web site, offers three credit reports and one credit score for $29.95. The price at AnnualCreditReport.com for that package would be $7.95. TrueCredit.com – run by Trans Union – offers the three reports that could be obtained for free at AnnualCreditReport.com for $14.95.
Bundling scores in with reports might not sound like that bad a deal until you consider this: The credit score consumers buy from any of these sites is very likely not the same score that's used by their bank or insurance company to compute rates. Many institutions use their own formulas to compute such scores. Auto insurers use something called an "insurance score," for example.
All these free sites want to sell you more than a one-time credit score purchase. They really want to sign you up for a monthly "credit monitoring" product costing about $10 a month that will allegedly help protect you against identity theft. The virtues of such products can be argued, but a credit monitoring service has nothing to do with your right to see a copy of your credit report.
Watch those free trial terms
These sites also muddy the waters by using confusing terms. Most of the sites say the offer is free because they allow consumers to sign up and then cancel their subscription during a free trial period. But read that fine print carefully. At FreeCreditReportsInstantly.com, consumers have seven days to back out of their purchase. At MyFico.com, even stranger terms apply for a "free trial" of a service called "ScoreWatch"
"You can use the link below to cancel your Score Watch ... AFTER your subscription has been active for at least 23 days and BEFORE your subscription automatically renews after 30 days," the site says. "If you are outside these time requirements, you will receive an error message and will need to call or email us."
If you forget to cancel, or miss a reminder e-mail, you'll be billed the annual subscription rate of $89.95. Users can cancel later, but must pay for a minimum of three months of service.
Craig Watts, a spokesman for Fair Issac, which operates MyFico.com, said criticism of the cancellation system was unfair because consumers could cancel their subscription by telephone or e-mail at any time. He added that Web-based cancellations required a 23-day waiting period as a way to "encourage people to give the service a fair shake."
Consumers who buy their credit scores from FreeCreditReportsInstantly.com also find themselves signed up for something called "SavingSmart." But don't worry, memberships go for the "special low price of $1." A representative of FreeCreditReportsInstantly.com did not respond to requests for additional information.
But Jack Rustenhoven, who runs FreebieCreditReport.com, defended his site's sales tactics.
He said he marketed his credit report service "long before AnnualCreditReport.com" came into existence and noted that he includes a link to the free site on his home page, adding "I encourage (users) to try both services." He also said that "it's no secret" to site users that they must sign up with Experian's credit monitoring service before getting copies of their credit report from his site.
"I can only speak for myself, but I know many of us … are in no way trying to imitate the annualcreditreport.com Web site." He said. "We're just doing what we've been doing for years before that site existed."
Many sites trace back to Experian, Trans Union
The Consumers Union report suggests that smaller sites are actually part of a large network. Most of the sites surveyed are either owned by or affiliated with the major credit bureaus. Trans Union, for example, works with PrivacyMatters.com, which runs Free3bureaucreditreport.com, FreeCreditReportsInstantly.com and a number of other free credit report sites. At the bottom of the PrivacyMatters Web site home pages, you'll find this message: "Credit services provided by TransUnion Interactive, Inc."
Maria Fernanda Rodriguez, spokeswoman for PrivacyMatters.com, would say only that the two firms have a "business relationship." Trans Union did not respond to requests for information about Privacy Matters.
One thing you will have trouble finding on the sites affiliated with Trans Union: Mention of the true free credit report Web site. In fact, 10 of the 24 sites studied don't mention AnnualCreditReport.com anywhere, and only 8 mention the real free site on the home page.
Experian also runs a family of free credit report sites, starting with FreeCreditReport.com and FreeCreditReports.com. Those sites include a prominent mention of AnnualCreditReport.com. Of course, it wasn't always that way. The Federal Trade Commission had to initiate legal action against Experian in 2005 to get the firm to point to the congressionally mandated Web site.
If Experian's commercials are to be believed, that link doesn't hurt business much. In recent TV advertisements for FreeCreditReport.com, an actor says that 20 million people have gotten their "free" reports from Experian. That's not including the free credit reports given away by Experian at AnnualCreditReport.com, according to Experian spokesman Don Girard.
Girard said Experian would not grant an interview concerning the Consumers Union report.
The third major credit bureau-- Equifax -- didn't pop up in the Consumers Union study and apparently doesn't use the free credit report sales tactic. But Mayer, the study's author, was very critical of Experian and Trans Union.
"The reason why was FACTA (The Fair and Accurate Credit Transaction) was passed was to help people get their credit reports for free," he said. "Well, Experian and Trans Union are doing all they can to keep this as something that they sell. ... That's pretty upsetting."