A credit score is an important factor in determining your overall financial health. Many Canadians are aware that their credit score can have a huge impact on their financial futures. To better grow and manage their credit score a number of Canadians have been flocking towards free third-party credit scores services. These services allow Canadians unlimited access to their credit scores, to help them keep better track of their credit.
Why Should You Check Your Credit Score?
A credit score is a financial instrument that lenders use to evaluate a borrower’s credit risk. The higher your score the less risky you’ll seem as a borrower and the higher your chances of obtaining a loan at an affordable rate. In general, those with a credit score of 650 and above should have no problems being approved for a standard loan, however, those with a lower credit score should try and improve it before applying with any lender. This could help them from having to rely on high-cost loans like payday loans and auto title loans.
Moreover, many consumers also check their credit score before they apply for a new credit product, to see if their credit-building tactics are working or to examine their credit report for inaccuracies, credit fraud, and identity theft. Overall, there are many benefits to checking your credit score, so many consumers are taking advantage of these free credit score services.
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Are Free Credit Scores The Real Deal?
While there are many free credit score services available, some plenty of people are skeptical about free credit score services. After all, how can a business make a profit when their products are advertised as “free”? Here are a few catches to “free” credit scores.
Your Credit Score Is Not The Same As The One Your Lender Sees
A free credit score service is typically a website where you can see your credit score and sometimes your credit report at no initial cost. Many people prefer this to Equifax or TransUnion, where there’s a fee to see your score and any extra copies of your report (you’re entitled to one free copy per year from each credit bureau).
However, the score you find on one of these free websites may not be the same one potential lenders see when you apply for new credit. Actually, multiple versions of your credit score exist and each credit bureau and credit score service has its own way of calculating it.
That’s why you’ll often see a different credit score when you check with Equifax or TransUnion than you will with a private company like Borrowell or Credit Karma.
Your “Free” Credit Score is Not Your “Beacon” Credit Score
Unfortunately, these “free” services aren’t giving out your true credit score but rather your “client” credit score. In reality, your Beacon credit score is the official score supplied by both credit bureaus and is what most lenders look at. Like some client scores, your Beacon score generally ranges from 300 to 900.
Learn more about how your credit score is calculated.
Here’s the biggest difference; your Beacon credit score is only available to businesses, not to individuals or consumers. So, when you pull your client score from a free or low-cost credit monitoring service (including a credit bureau), it may be higher or lower than the one that would otherwise get you approved or denied by a lender.
They Use Your Credit Data For Marketing Purposes
Although your client credit score is technically “free” through one of these services, you may be paying the provider in a different way; with your personal information. In fact, your personal and financial information can be quite valuable because it makes it easier for them to market other products and lending businesses to you based on your profile.
Essentially, while these companies may sell seemingly helpful products, you’re giving them permission to access your official credit report and credit score. They can then use your information to send you marketing materials, loan offers, credit card offers, etc.
They Get You With Other Offers
While some may actually recommend good products that can help you, they may simply push products that will earn them more money. For example, you may be shown offers from service providers with very few requirements. These offers can be particularly appealing if you’ve had trouble getting approved for credit in the past. Of course, the products come with high rates and fees.
Typically, the products that they predict will earn the best returns are pushed upon clients to compensate for the lack of profit that comes from their free credit monitoring service.
Your Client Credit Score Is Not Always Free
There are other ways that a company offering “free” credit scores can make money from you, like monthly subscriptions. Since their side products and services are labelled as optional, they might offer a free trial period to hook you.
After about 30 days, the trial ends and you’re stuck paying a monthly fee or going through an annoying cancellation process. While you can see your client credit score whenever you want, it’s definitely not as important as your official Beacon score.
Where Can You Get Free Credit Scores?
In Canada, you can get your credit score and report from both credit bureaus in Canada, however, only Equifax provides it for free. Transunion charges clients a monthly fee of $19.95. You can also get your free credit score from third-party websites like Mogo, Credit Verify, Borrowell and Credit Karma.
(with credit monitoring)
Will checking my credit score hurt my credit?
Why is my Transunion and Equifax credit score different?
Are free third-party credit score services safe?
What does it mean when TransUnion is unable to verify my identity?
Is Getting Your Credit Score For “Free” Really Worth It?
Free credit score providers are not trying to take advantage of you, they are simply offering a service that comes with a few conditions, as most services and products do.
What they do is allow you to look at a basic version of your credit score, then use your information to market different products toward you, hoping that you’ll take the bait and it’s up to you to bite or not.
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