“Free” credit reports?

I’m not sure many folks recognize just how lucrative the numerous “monitor your credit report” services are for the credit bureaus and others. Here’s the typical sequence :

1. Advertising campaign oriented around fear of identify theft or catchy jingle

2. You sign up to view your credit file with the 3 major bureaus (experian, equifax, and transunion), often thinking it’s free (there’s debate about whether they have misleading advertising practises)

3. They put you on to a fee of around $15/month associated with a monitoring service. You could cancel at any time but many don’t.

(This is not to be confused with Annualcreditreport.com – a government mandated free service to get your annual credit report)

Are customers being misled … or do they really value this service at $15/month? If it were the latter, then why not be more transparent about the cost up-front? Take a look at the landing page of each of the bureaus (truecredit.com, freecreditreport.com, and equifax.com) and see how prominent the word “FREE” is. Maybe some people value the service at $15, and some may even get that sort of value if they’re the target of (frequent) identity theft, but I’d guess many just aren’t paying that much attention.

Maybe this is ok if the bureaus have high costs. Eh. Hang on. Isn’t this data they already own? How much does it cost to run a query and send an email again? The marginal cost has to be pretty close to zero; this is pretty much all marginal profit. There are some fixed advertising costs to sign people up for this.

It’s hard to get granular data on the market size, but it might be >$400m/year at a rough swag (Equifax is $149m/year in personal solutions, Experian has ~10m customers in the US & UK, Transunion is privately held). Some of this includes identity theft protection to be sure, so add some large error bars on that.

They are not scams as some sites claims – the sites do outline the fees for a valuable service – however I hope everyone is going in with their eyes open. Actively monitoring and managing your credit report is important – I hope you’re making a conscious choice about the value of that.

Any thoughts?

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