Credit scores have become a weapon of mass seduction

Worried about your credit score ? Maybe you weren't before, but now that I mention it you may be wondering when the last time you checked it was. Even if you're pretty sure it's fine, the topic is often enough to cause a moment of panic , a sinking feeling followed by an "Oh God, what if something's happened?"

That little three-digit number is a big deal in our financial lives. It serves as a sort of grade for how you handle money. An A gets you approval for an apartment and a decent rate on your car loan; an F gets your rental application turned down and makes your car insurance more expensive. You might not have even realized it, but your credit report could even make a difference in whether you land your next job .

The anxiety around credit scores is palpable. It's also lucrative. Credit bureaus, startups, and even one-man operations can make a lot of money by playing into people's fears about their credit. They offer services that monitor credit scores and alert you when yours changes, or they say they can help you repair your damaged credit — for a price, of course. Many of these costly solutions do not work as well as promised or deliver much, if any, bang for your buck.

"The credit-scoring companies have figured out how to profit on the anxiety of consumers with credit watch and credit monitoring and all of these add-on programs," said Aaron Klein, a senior fellow in economic studies at the Brookings Institution, a nonpartisan think tank. "When companies find a way to profit off of anxiety, they have an incentive to create anxiety."

What these companies won't tell you is that the best things to help ease your credit-related worries are cheap, even free. You can check your credit regularly at no cost from a lot of sources — your credit-card company likely tells you your score, and you can access your report weekly free of charge too. Freezing your credit also doesn't run you anything. It's important to be aware of your credit score, but you don't need to obsess over it — or let marketers convince you to pay for a bunch of stuff you don't really need because you're panicked.

Around the time of the Super Bowl, I noticed that the Kansas City Chiefs tight end Travis Kelce was appearing in ads for Experian, one of the big three bureaus responsible for keeping track of everyone's credit scores. I decided to write about it and, in the process, created an Experian account. The company has been hounding me ever since. I get near-daily emails that range from run-of-the-mill product offers and "credit alerts" to nerve-racking warnings that my information may have been part of a data breach. When I click for more information, lo and behold, I'm confronted with a paid service. For $25 a month, I can sign up for "Experian CreditWorks Premium," which includes quarterly credit reports, credit monitoring, and identity protection. Once I decline that offer, which is kind of tricky, I can also find an offer to "lock" my credit for $5 a month. It's similar to a credit freeze, which blocks creditors from accessing your credit file, but can also do things like notify you if someone tries to access your Experian credit report. Here's the thing, though: A lot of the services it's offering are already free.

"There's no reason ever to pay for credit monitoring," said Chi Chi Wu, a senior attorney at the National Consumer Law Center. "There's no reason to pay for a credit score or pay for service for the credit score."

In Wu's view, Experian is an especially bad offender — not just for its suite of likely unnecessary products but because, as part of its standard agreement, the company makes customers agree to mandatory arbitration, meaning you don't get to sue if Experian has a big screwup later. In an email, a spokesperson for Experian said that the company is "committed to financial inclusion" and that its free membership has tools to help consumers improve their financial health. "Millions of members find value in having Experian as their financial co-pilot helping them improve, manage, and protect their financial profile," the spokesperson said. They did not address the arbitration agreement.

There's no reason ever to pay for credit monitoring

But Experian is hardly the only company out there selling credit-related services that drain consumer dollars. The credit-monitoring and identity-theft-protection industry, according to IBISWorld, is worth about $5.4 billion in annual revenue. The growth of the industry makes sense — in this day and age, data breaches are constant, and a fraudulent ding on your credit report or someone opening an account in your name can be an enormous headache. Guarding against that outcome seems like a small price to pay for a lot of people, except that paying any price above $0 may not actually be worth it.

A 2022 brief from the NCLC described credit-monitoring bundles as often "expensive and ineffective" and argued that they failed to meaningfully benefit consumers. It noted that most identity theft takes place in existing accounts, meaning monitoring services that alert consumers to newly opened accounts miss it. They also often fail to catch fraud related to medical services or tax refunds. And even when they do catch identity theft, they do so after the fact.

"Some people might be like, 'Well, I'd rather pay and not deal with the time,'" Wu said. "But the thing is those products aren't all that effective."

A 2017 report from the Government Accountability Office was pretty negative on the whole monitoring and identity-theft-protection business, too, saying it's just not clear how helpful a lot of this stuff is. The report also looked at identity-theft insurance and noted that while it covered expenses related to dealing with the theft, it generally excluded actual financial losses.

They're basically charging people with the false promise that they're going to be able to fix their credit reports and credit scores permanently when they can't.

While credit monitoring falls into the waste-of-money category, other credit-related services can cross over into potentially predatory territory — for example, credit-repair operations. The idea behind these services is pretty simple: Credit reports often include some mistakes that can ding people's scores. So, for a fee, the companies will dispute a bunch of items in hopes of boosting the score. This may improve people's reports temporarily while the disputes are being investigated, but since the firms are basically disputing anything negative, when they lose, everything goes back to how it was, and the customer is just out more money.

"They're basically charging people with the false promise that they're going to be able to fix their credit reports and credit scores permanently when they can't," said Sarah Chenven, the CEO of Working Credit, a nonprofit that helps people build credit.

Credit-repair companies often target people with lower incomes and people desperate to improve their credit reports and scores. Gen Zers and millennials, who tend to have lower credit scores than older generations and may not have extensive credit files, may be more likely to find themselves looking at a credit-repair service to get negative items off their reports or at some sort of credit-building service to just help them develop a record. Credit-monitoring companies can really appeal to anyone worried about their credit and identity theft. Some of these businesses also make money by marketing various financial products to people — a well-off boomer might get one type of credit-card offer, a struggling student another.

The companies also don't do anything people can't do on their own — if there's an error, you can and should dispute it yourself. In fact, credit-repair agencies can be less effective than the average person at getting mistakes wiped from their credit histories because, as Andrew Pizor, a senior attorney at the NCLC, explained, the law says that credit-reporting agencies have to respond only to dispute letters directly from consumers. Credit-repair businesses try really hard to make it seem like disputes are from consumers, and the agencies try just as hard to sniff out whether that's going on.

"Most of the letters that you're paying for are going into the garbage," Pizor said. He added that if your dispute letters are going unanswered, you don't need a repair service — you need a lawyer.

Federal regulators have gone after several companies accused of playing it fast and loose with the way they approach consumers. In 2017, the Consumer Financial Protection Bureau settled with TransUnion over charges related to how it was marketing its products, including credit monitoring, and ordered it to stop deceptive practices. In 2022, it sued TransUnion, accusing it of violating that order. In 2005, it dinged Experian for marketing free credit reports that weren't so free. Last year, the CFPB entered into a $2.7 billion settlement with a ring of credit-repair brands accused of illegally collecting fees for their services. Over a decade ago, the Federal Trade Commission and 35 states reached a $12 million settlement with LifeLock after alleging that it had made false claims about its identity-theft-protection services.

These companies and credit-related services aren't necessarily evil. A significant part of the issue is that the ecosystem is a mess. Our credit-reporting and -scoring system is outdated and confusing, and so are a lot of the businesses that have sprung from it. Even the seemingly good products and services out there are a sign of the deep rot at the core of the whole system. Credit-building loans, which are loans designed to help people without much credit history build some, can help people get on better financial footing , even if there is usually some cost involved. Immigrants and young people in particular can benefit.

Companies such as Credit Karma that let you access a lot of your information easily and for free make it so your credit score isn't such a mystery. The downside there is that they make their money by giving your information to a bunch of third-party financial products and taking a cut if you sign up for one of them. For consumers, the whole thing feels like a maze. It's tough to separate the good actors from the bad and to understand the trade-offs at hand. It's not always clear what you're signing up for, whether you need it, or what you're going to wind up paying.

"The credit system and the financial system, and I hate to sound a little preachy, but it's a black box," said Ryan Steckler, a vice president of product and general manager at Credit Karma. "Given that situation, we're in the business of empowering our consumers by giving them access to the same data those financial institutions have."

It would be neat to be able to say that some concrete help is on the way, but the truth is we're stuck with some not-so-fun realities around credit scores for the foreseeable future. As screwed up as the system is, it's probably not going anywhere anytime soon, even though there are better alternatives out there .

There is this sense of existential dread around credit scores. A negative one can really drag people down. An impaired record makes loans more expensive, makes accessing certain financial products impossible, and may even put your next apartment or job out of reach. Klein, from the Brookings Institution, has recently been conducting focus groups with low-income consumers about their financial knowledge and concerns. He's been shocked at how much credit scores have come up.

"I was very surprised at the attention to detail folks of more modest income have on the impact of financial products and choices on their credit scores," he said. "The more I thought about it, the more I realized this focus is based on experience. At some point, their low credit score has negatively impacted their lives."

Frederick Wherry, a Princeton sociologist who leads the Debt Collection Lab, an initiative focused on understanding debt collection, added: "As soon as we are asked about our credit scores, or in a moment when we can't get something we need or we get it at too high a price, that's when we realize that this thing has been hanging over our heads."

This is not your SAT score.

It's unwise to bury your head in the sand, ignore your credit score, and hope for the best. But you don't need to obsess over it, let alone spend a bunch of money on it. If you're not in the market for a house or apartment or in need of a new loan, you can freeze your credit for free, meaning no fraudsters can take out a loan in your name. Under federal law, the bureaus have to give you one free credit report a year, and since the pandemic they've been letting people access their reports for free once a week. If you see something weird on your report, you can dispute it on your own. And you really do not need to be checking that much — once a month or once a quarter is fine, kind of like your 401(k).

"If you have a credit score over 720 or 780, stop worrying. Don't be obsessed with getting an 800 or 820," Wu said. "This is not your SAT score."

If you're in trouble, there are nonprofits out there that can help you figure out what to do, for little or no money.

"If you've got bad credit, if your credit score is low, where I'd start is with a nonprofit credit counselor," Pizor said.

If you want to sign up for identity-theft protection or credit monitoring, fine. But those services aren't a fail-safe, so you'll want to walk in with your eyes wide open. The credit experts I spoke with were very wary about credit repair across the board. The next time you start to worry about your credit score, take a beat. Not to get too woo-woo here, but really, there's only so much you can control.

"I mean, the magic bullet is building a better system," Wu said.

Emily Stewart is a senior correspondent at Business Insider, writing about business and the economy.