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A Potential Credit Score

Bureaus See Chance for a Profit in Free-Report Act

By Caroline E. Mayer
Washington Post Staff Writer
Wednesday, November 24, 2004; Page E01

Ordered by Congress to give consumers free access to their own credit reports once a year, the nation's three largest credit bureaus are turning that requirement into a marketing opportunity.

When the free service, www.annualcreditreport.com, is launched on Dec. 1, consumers will be offered a variety of fee-based programs.

Credit Checkup Starting next week, millions of consumers will be able to get free annual credit reports from each of the three major credit bureaus via a new Web site. By the end of next year, all Americans will have that option.

All three companies -- Equifax, Experian and Trans Union -- will charge consumers extra if they want to get their credit score, a creditworthiness rating used by lenders to extend credit and set an individual's interest rate. The price will range from $4 to $7, depending on the credit bureau.

But credit scores will be just the beginning of the for-fee offerings on the free service that will be rolled out nationally over the next 10 months, beginning on the West Coast Dec. 1 and ending on the East Coast Sept. 1. The free credit reports were mandated by Congress last year as a way to combat identity theft, which government statistics show has harmed more than 10 million consumers annually. By reviewing credit reports, consumers should be able to spot any suspicious activity, such as credit cards they never requested.

Experian Information Solutions Inc. will offer a new credit-monitoring system called Triple Alert. The company will charge $4.95 a month to audit a consumer's credit record at the three major credit bureaus; if any company makes an inquiry into the consumer's credit, an instant message will be sent to the customer's cell phone to make sure it's not an impostor trying to steal that consumer's identity to fraudulently buy goods and services.

Trans Union LLC will offer debt analysis for $5.95 a month. For $10.95 each quarter, consumers can get updates of their credit reports every three months. That service includes $25,000 of identity theft insurance to help offset legal fees, wages lost as a result of time off to deal with the identity theft and other costs.

Equifax Inc. plans to give consumers, at no charge, the ability to revisit their reports for up to 30 days. But, once consumers agree to that, Equifax will consider them customers who could be eligible for all sorts of future marketing promotions. Consumers who elect to buy their credit scores won't be considered customers unless they take the free option of seeing how their scores rank nationally and locally.

Credit bureau executives say the marketing of fee-based services will help offset some of the costs they have been ordered to incur by Congress. "It was not our idea to give these products for free so we could increase our marketing base," said Experian spokesman Donald Girard. "Everything the consumer does is optional," he added. "We're not stealthily marketing" to consumers.

Consumer advocates, however, fear the tools may turn into a moneymaking venture that will confuse consumers into unnecessary spending.

"The law is supposed to give consumers an incentive to check their credit reports regularly for errors or signs of ID theft. The law is not to be an incentive for the bureaus to market their products," said Beth Givens, director of the Privacy Rights Clearinghouse, a nonprofit consumer advocacy group. "We've been calling for free credit reports for years. This is a very positive step for consumers," she said. But marketing fee-based services, she added, is wrong and unnecessary.

Givens advises consumers against buying credit monitoring service unless they have been victims of identity fraud. Instead, she said, consumers can do it themselves, for free, under the new law by ordering a report from one bureau, then waiting four months before ordering another report from another bureau. Four months later, they can order from the third bureau -- and then repeat the same process annually.

"I think the marketing has a real chance to detract from the purpose" of the new law, "which is to keep people focused on getting a free credit report so they can improve its accuracy," said Evan Hendricks, author of "Credit Scores & Credit Reports." Hendricks also said identity-theft insurance is unnecessary. "It usually doesn't cover what's most important -- the help you need in getting your record cleaned up."

"We're looking at this as an opportunity to help you manage your overall financial health -- to provide tools to give you a holistic view of your financial health and allow you to better manage it," said Trans Union spokeswoman Colleen Martin.

"We're offering good opportunities above and beyond the basics to help consumers improve their financial credit," said Equifax spokesman David Rubinger. "It's not like giving them a toaster to get them to sign up."

Marketing the fee-based services was approved by the Federal Trade Commission when it wrote the rules for the new system. As long as the services do not interfere with the ability of consumers to obtain their free credit reports, the credit bureaus are allowed to sell their services, said Peggy Twohig, assistant director at the agency's division of financial practices.

"If we allowed only a free credit report, that would cut out things we thought would be valuable, like a credit score," Twohig said. "It didn't make sense to have consumers go to a separate Web site to get that. . . . This is a whole new right being implemented by a whole new entity. We're going to have to see how it goes. If there are problems, we can react to those and adjust as needed."

© 2004 The Washington Post Company