A venture capitalist, doubling as a professor during a week of mini university for high school students, told my daughter the following: When you get something for free, you are the product. They were looking into free apps and how companies make money when they give their products away for free. There’s always a catch.
In the last few years, several companies have come into the market to offer consumers free access to their credit scores instead of paying the credit reporting agencies for them. It may be worth it for you to consider one of the free options available in Canada at the moment, provided you understand the trade-offs.
Here, then, is the scoop on three options in Canada, at the moment, with some pros and cons for each.
This is an American company that has moved into the Canadian market to offer free credit scores once you sign up for an account. The following are the key details about them:
How do they make their money if they offer freebie scores? They show you targeted ads from financial companies, on their website, based on the information you provided as well as your score. It’s a huge win for the financial companies because they get to niche their offerings by selecting the specific demographic they’re after. The consumers win by getting access to the information on their credit reports without having to pay a fee to Transunion; and Credit Karma gets paid for being the middle man.
If you’re OK with this exchange of information for a freebie plus targeted ads, then it’s a win.
This company takes a different approach to Credit Karma. For starters, it’s a Canadian company and it offers information from Equifax instead of Transunion. And now the details:
One of the things that struck me about Borrowell was their seemingly helpful offer to make recommendations based on my profile. According to them, my score is 849. Given that the highest score possible is 900, that’s a really good score. I never run a balance on my credit cards and I’ve been paying down my investment property mortgages ahead of schedule. If you were a financial company, what kind of product or ads would you show me? Maybe something about investments? High interest savings accounts? Instead, this is what I got from Borrowell:
Based on no evidence of need, I’m told I have a high likelihood of being approved for a loan of $1,000 to $35,000 (!!) in less than two minutes.
And this is where you find out that where possible, they will push their loans. Just a wild guess here, but where do you think they make the most money?
Buyer beware. Don’t get sucked into loans you don’t need or shouldn’t have. And if they say yes based on a two-minute approval process, shop around; you can probably get a better rate than 5.6%.
This is a loan company. They’re pretty much the same deal as Borrowell in that they offer you information on your credit report from Equifax and they provide it for free with a three-minute sign-up. Here’s the difference: When my “congratulations for signing up with us” message popped into my inbox, it came with an offer of a $5,000 loan. “Congratulations, you qualify for a loan!” the email boasted.
I had not asked for a loan; I had asked for a free credit report. They offered it anyway. Unlike Borrowell, where I clicked on the tab promising recommendations, this offer came at me, as did two others within the next couple of days.
If aggressive marketing and attempts to get you to borrow money is what you’re after, then this is your company.
They’re targeting the millennial set who may have more trouble accessing loans, as well as those who may be looking to refinance debt. In all cases, shop around and read the fine print. The fabulous-sounding offers may not be so great when you do a bit of digging.
If all you’re looking for is a free credit report and score from Equifax, I’d stick with Borrowell.
It’s still worthwhile to pull your free report, once a year, from both Equifax and Transunion to ensure that everything is accurate. Here are the links to your free reports:
Free Equifax report. If you also want your score, you’ll need to pay $11.95 to get it.
Free Transunion report. I didn’t find an option to tag on your score. To get the latter, you’d need to set up an account and pay $19.95. My suggestion: Just get the free report and check your score through Credit Karma.
Bear in mind that the score you get through any of the three providers mentioned above will not be the same as the score lenders see when they pull your bureaus. That’s because each lender negotiates their own proprietary report with the credit reporting agencies. Don’t worry about that. Just focus on the basics of maintaining a good score and you’ll be fine.