Credit apps know that you’re concerned about your credit score and how it affects large purchases, like a home, and they’re looking to cash in. Consumer Reports recently concluded an investigation into credit services like Credit Karma, Experian Credit Report, and others that provide financial advice along with access to your credit information. What they found may be surprising if you’ve been relying on these services to improve your financial profile.
The possible downsides to credit apps
For one, four of the five apps in the Consumer Reports investigated charged users to access their credit reports. This is particularly shocking because, according to the FTC, you’re entitled to at least one free credit report every 12 months. In fact, you can visit today to see what’s in your report without paying a dime.
Another drawback to consider is that many of these apps don’t use the credit scoring system that lenders generally rely on. There is more than one credit scoring system in use, and while FICO scoring is what lenders generally look at to access creditworthiness, many of these apps use VantageScore 3.0. With a different range (FICO’s 300 to 850 versus VantageScore’s 501 to 990) and other variations between them, you may get a false impression of your credit health.
When working with these companies, you may also want to consider how your data is used. According to statements given to news outlets, companies like Credit Sesame work hard to protect your data from hacking, but they’re a little vague about how your data is used when it comes to third parties sharing.
Tips to improve your credit score
Improving your credit is crucial to preparing for a home purchase. Credit apps may help make that happen, but you should be aware of their pros and cons while also doing what you can outside of those services to raise your score. Here are a few tips from Forbes Magazine that you’ll want to consider when repairing or strengthening your credit score.
1. GET YOUR HANDS ON YOUR CREDIT REPORT — You need to be aware that a problem exists before you can solve it, and serious issues, or sometimes minor ones, can take months to repair.
2. FIX MISTAKES — When you spot errors or inaccuracies in your credit report, it’s up to you to fix them. You can find step-by-step guides on how to file a claim on any of the credit bureau websites or report itself.
3. PAY YOUR BILLS ON TIME — It may sound obvious, but if you’re looking to increase your score over time in a steady upward climb, never miss a payment. Ever.
4. PAY OVER THE BOTTOM LINE —Always make more than the minimum payments on your revolving credits each month. A history of minimum-only payments is not a positive indicator for anyone reviewing your credit report.