Citibank to start offering free credit scores to credit card customers; Chase and Bank of America considering the same
CLEVELAND, Ohio -- Citibank in January will become the second major credit card issuer to provide FICO credit scores to customers every month.
The move, coming more than a year after Discover became the first major issuer to include credit scores with customers' monthly online statements, signals this will become the norm in the near future.
Citi is the nation's third-largest card issuer by amount of credit issued, behind Bank of America and Chase. Both banks said today they're considering doing the same.
Cit's decision is big in a year when federal regulators have been pushing banks to be more transparent to customers. That transparency can help people better understand what influences credit scores, improve their ratings and discover identity theft or other problems.
The information from Citibank will be provided only online, said Citi spokeswoman Emily Collins. "This is the same score Citi Cards uses in lending decisions and will be available online for free every month."
And the scores will be provided only to the 23.5 million customers with Citi-branded credit cards, not those branded with other companies, such as Sears, Best Buy and Macy's.
The scores will be provided based on information in people's credit reports from Equifax.
Citi said it decided to offer credit scores because "we are always evaluating new benefits that will provide enhanced value to our card members," Collins said.
The news is good for consumers, but it's just one step, said Kathy Virgallito, national manager of community affairs for Apprisen Financial Advocates.
"Knowing your credit score is great if you have some context to that information," she said. "If getting the score on your statement prompts you to find out what makes up that score and what you can to do maintain or improve your score, then that's terrific."
Virgallito noted that Discover's statements include a whole page about credit scores and offer more information for those who register on their website. "If Citi does that, too, it will be helpful to their customers," she said.
She added that it's still important for people to check their credit report directly. "They need to see what's directly creating their score and to catch any incorrect information or fraudulent activity," she said. "With those two items (credit score and credit report), consumers are more likely to be ready to look at how they are managing their finances. We think this information is essential to moving forward, particularly today."
While consumers have many outlets to get their credit scores, some aren't accurate and others lead to scams. Both Citi and Discover
are using formulas from Fair Isaac Corp. to provide FICO scores, which are the ones lenders generally use. FICO scores aren't the same as Vantage scores or others people may run across. Discover is using FICO scores based on TransUnion reports. Citi is using FICO scores based on Equifax reports.
Credit scores can vary among the three bureaus because each bureau could have slightly different information, but the three generally should be within 20 to 40 points of each other. A person's score can also change slightly from month to month even without any major changes in information on the credit report.
The White House announced Citi's plans on Friday and applauded banks that have started giving people their credit scores at no charge on a regular basis. Among the banks doing this besides Discover are Barclaycard and First National Bank of Omaha, as well as Pentagon Federal Credit Union.
All told, about 70 million Americans now have access to the credit scores monthly, according to the White House. That's before the Citi rollout.
Discover came out swinging with this strategy last year, believing it would cause existing customers to be more loyal and lead others to consider moving to Discover if they were looking for a change.
While providing credit scores is still a competitive advantage, it's expected to soon become the norm. That could occur in the next year if a few more key players follow Discover's and Citi's example.
At Chase, "we are considering it," said spokeswoman Christine Holevas.
Ditto at Bank of America. "It is something we're evaluating," said spokeswoman Tara Burke.
There was no indication from either about a possible timeframe.
With all of the push toward fairness and transparency after the 2008 financial crisis, banks have been under mounting pressure to play nice with consumers. It could be that banks are moving toward free, actual credit scores for customers before regulators force them to do so, as they did with credit reports a decade ago.
"I think it might take a few more companies to come on board before it is expected," Virgallito said, "but our experience here is that credit scores are of great interest to consumers of all economic means. Understanding credit reports and scores is one of our most popular workshop topics."
It was 2003 when Equifax, Experian and TransUnion started being forced to provide all consumers with a copy of their credit report once a year at no charge. That requirement was part of the Fair and Accurate Credit Transactions Act was passed by Congress and signed by President George W. Bush.