The Art of Selling you a Free Credit Report for Money
Anyone can get a free credit report from each one of the three credit reporting agencies at the one and only website the federal government approves of - Annualcreditreport.com. So when it gets competition from a private company called Freecreditreport.com that advertises on television with funny routines and asks people to choose it instead, the government begins to get annoyed. Freecredit report.com is certainly free if all you want is a credit report; but they try to also get you to sign up for a monthly service that costs about $15 that promises to alert you whenever there is something that comes up with credit status. The government believes that the company is deliberately trying to distract people from the fact that getting your credit score free from the government is just as easy, and even better.
The government can't really do anything about it; it isn't against the law to try to give away free credit reports like that company does; they just need to make sure that they don't get their business by misleading people into believing that there isn't a better way. The government has been putting out advertisements that spoof the ones made by Freecreditreport.com. The original ad by the company features a group of three underachievers twanging along on their guitars, singing about how they ruined their lives not applying to get their credit scores free on Freecredit report.com. The spoof has very similar looking group of people, singing a very similar song, only with different words that warn you about Freecreditreport.com's upsell.
Alerts about changes to your credit status may sound like a good idea; except that it could actually expose you to identity theft. Your credit report will constantly get information on every financial move you make - investments, new bank accounts, etc. Crooks would actually want to get a real-time update to see what financial moves you make that they could take advantage of. But that apart, your credit status isn't something that changes every day that you would want a real-time alert system set up for it. Getting your copy of your credit report free a couple of times a year should do just well - Equifax, Experian and Trans Union will give you one each year apiece and not try to sell you anything on the way.
Experian, the company behind Freecreditreport.com has a great business in the credit status alerts business. The alerts business is a $750 million one; and Experian is the biggest player. Those ads it puts out bring it all of its business. And when Capital One and Discover try to sell you credit report alerts, they are actually selling you Experian's free credit report, only with their name on it. The FTC has been going after Experian for five years now, and collected more than $1 million in fines as punishment for putting out ads that make people think that they have to pay money to get their credit report. The government is coming back with harder hitting rules. They're going to ask Experian to put up a full disclosure warning that tells everyone that getting a credit report is actually free, and an alerts service is an upsell that costs money.
At one time, credit reports cost money. It was only about seven years ago that the government made it mandatory for the reporting agencies to provide you with a free credit report once a year. Now that Freecreditreport.com ends up confusing people a little bit about what they need to pay, the government has come out with its own competing site, Freecreditreport.gov, to help end the confusion.
Opting out of free credit reports and going the paid route is all about the extra protection it is supposed to give you when you keep an eye on everything that happens in your name - is anyone fraudulently trying to open an account in your name? Is anyone using your identity to check into a hospital? But even here, the alert system doesn't really give you value for money. Not all events show up.
Experian's business model is this - people can't get enough of knowing how much of their lives is visible to other people. They need to know how other people see them. Credit report alerting services, try to satisfy their appetite for this, and therein lie the seeds to a whole new multimillion dollar business.
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