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More credit card companies providing free monthly credit scores

by Peter Andrew

Ever since they were invented, credit cards and credit scores have had a close relationship. Manage your plastic well, and your score's likely to rise. Abuse it, and your score could be in trouble. But, over the last few months, a new relationship has developed between the two, as up to 30 million Americans have begun to receive their credit scores and other related information within their monthly card statements. Capital One revealed Tuesday that it was joining Barclaycard, First Bankcard and Discover in providing this service.

Knowledge empowers

All this became possible last November, when FICO, the company whose scoring technology is used in 90 percent of lending decisions, launched its FICO Score Open Access program. This allowed credit card companies to share with each customer his or her credit score every month free of charge. In addition, card statement enclosures would identify the two factors that had most affected their scores, along with relevant educational materials.

"Our consumer education website, myFICO.com, has been up for 10 years, but what changed in the financial crisis of 2008 is that you have a more sophisticated consumer now who recognizes they need to be more active and aware about their financial information," said Anthony A. Sprauve, FICO senior consumer credit specialist. "We've always believed that educated consumers are empowered consumers. We've seen this shift where consumers are saying, 'It's in my best interests to know this information, so I'm going to seek it out.'"

By the way, it's a common myth that checking your own credit report hurts your score. It doesn't. Such inquiries, whether carried out personally or by a company on your behalf, are "soft." Only "hard" ones -- those initiated by lenders when you apply for new credit -- have an effect.

Goals and scores

Most people know that credit reports and scores can have an enormous impact of their financial lives. Some employers pull your report before they recruit or promote you. And a poor score can see your loan applications declined, or the mortgage, auto loan and credit card rates you're offered shoot up. However, knowing that and recognizing the true dollar impact are two different things.

In 2011, Liz Weston wrote a piece for MSN Money in which she created two hypothetical women, one of whom maintained a credit score of 750 throughout her life, while the other had an equally consistent 650. These fictional females had exactly the same student loans, credit card balances, mortgages (two each) and home-improvement loans. It cost the one with the lower score just over $200,000 more to borrow precisely the same amount over precisely the same period.

Of course, mortgage and other rates may have changed since those calculations were done, but the impact of scores probably hasn't.

Free at last

For a long time, consumers have had the statutory right to read their own credit report free, once a year, through AnnualCreditReport.com. However, many didn't know they could do so, some forgot or couldn't be bothered, and a whole lot felt annual access was insufficient. Those in the last group typically wanted much more regular access, so they could:

  1. Actively manage their scores.
  2. Spot errors in their reports. (In a 2013 Federal Trade Commission survey, one in four consumers found mistakes in theirs that could materially affect their scores.)
  3. Identify quickly any rogue accounts that appear on their reports. Often, the first sign of identity theft is an unknown account suddenly cropping up on one of these.

A number of subscription services have sprung up offering to satisfy these needs. However, these vary enormously: Some are expensive, and some don't provide genuine FICO scores. So it's hardly surprising that credit card companies that sign up to the FICO Score Open Access program may put a number of them out of business: Careful reading of the free information included with your card statement should certainly help you manage your score and may well alert you to new accounts.

Now Capital One says it's going further, offering:

  1. A credit bureau summary.
  2. A report card with letter grades on the main factors currently affecting the score.
  3. A credit simulator to show how actions could affect a score.
  4. Credit bureau monitoring, which could alert customers to possible fraud.
  5. The option of accessing all the above on mobile devices, as well as traditionally.

An alternative

If want a truly free and comprehensive credit score service, and your card issuer doesn't satisfy your needs, you could check out WisePiggy.com. This website delivers free credit reporting, money management tools and more. And it's a sister site to this one, so you know it's a piggy with a fine pedigree.

Published 03/31/14 (Modified 10/09/14)

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