Anyone in the accounts receivable management industry who credit reports cringes when the words “Credit Karma” are mentioned. The app has led to a significant spike in the number of disputes filed by consumers about items on their credit reports and caused companies in the industry to spend more time and resources investigating those disputes. Well, the benefits of using apps like Credit Karma may not be all they are thought to be, according to an analysis conducted by Consumer Reports, which wrote that five such credit monitoring services have “significant drawbacks and few upsides.”
Chief among the drawbacks was the type and amount of personal data that is shared not only with the providers of the services, but with other third parties who purchase the information to try and sell consumers their products and services.
Overall, using a credit app is a tradeoff that could do more harm than good, says Ed Mierzwinski, senior director for the federal consumer program at the U.S. Public Interest Research Group, a consumer advocacy group, who was not involved in the evaluations of the apps and is also a CR Board member. “You give up a tremendous amount of information, and allow these companies to collect a vast amount of information so that they can give you for ‘free,’ or worse, sell you a credit score that is not used in the real world,” he says.
Another problem with the apps is that most of them only give consumers one credit score, when most consumers can have dozens of different scores from different bureaus, each of which may be used by financial institutions or credit grantors when reviewing applications. It’s impossible to know whether the score a consumer sees using one of the apps is the same score that a credit grantor will see when pulling the consumer’s credit report from its service provider.
The article breaks down the different services offered by credit report providers and some of the drawbacks that each has, while also providing a series of tips that can help consumers understand and correct their credit reports.
