In August 1997, QSpace (now owned by Experian) was first to bring credit report data to the Web. The cost was $12 per report (see note 1), a price that has changed little over the ensuing 10 years.

Three years later, in October 2000, WorthKnowing.com introduced the concept of ad-supported (i.e., free) credit scores (see Online Banking Report, #66, article reprinted here). But the company failed to make it through the dot-com crash and ceased operations (note 2). Both QSpace and WorthKnowing earned OBR Best of the Web awards for their innovations.

It took seven years for the concept to reemerge, but now two Bay Area rivals are offering free credit bureau info in exchange for permission to present credit and other product offers. And just as I was about to finish this post yesterday, Quicken Loans introduced Quizzle, a personal finance/credit portal that also offers free credit bureau info (yesterday's post here).

Here are the players:

•  Credit Karma: This San Francisco-based startup, with backing from Prosper's Chris Larsen, is delivering an actual credit score computed by TransUnion, one of the three major U.S. credit bureaus. It does not precisely match the commonly used FICO score from Fair Isaac. And the scale is different, with a top score of 900 instead of 850. The credit score service is still in closed beta, but we'll see if we can get some invites from the company. Credit Karma will be presenting at our FINOVATE Startup conference April 29 in San Francisco, if you want to meet the team behind this new service.
•  Credit.com: Another San Francisco company, but one that dates back to 1995, recently launched a similar system, called the Credit Report Card. Credit.com CEO, Adam Levine, presented his other company, Identity Theft 911, at our inaugural FINOVATE conference last fall in NYC (video here). Credit.com provides a full evaluation of your actual TransUnion credit report and assigns letter grades to five different components of the overall score (see third screenshot below). The score is shown on a chart at the top that appears to top out at 850. The report is extremely well done. Like Credit Karma, the company earns fees from targeted offers. In our case, we were given a choice of applying for two Citibank cards.   
• Quizzle powered by Quicken Loans: Quizzle's business model is completely different because it's run by a financial institution instead of a lead generation site. The idea here is to get customers and prospective customers to use Quizzle frequently so that when the time comes for a new mortgage, the user remembers to apply at Quicken Loans. See yesterday's post for a complete overview.

Credit Karma homepage (15 Feb. 2008)

Credit.com Credit Report Card homepage (15 Feb 2008)

Credit.com Credit Report Card (top portion, detailed analysis of each section not shown)

Note:

1. QSpace charged $12 for the first credit report, then $5 each to reorder. Data was from Experian (see Online Banking Report #28).

2. TransUnion now owns the WorthKnowing domain name.

Coincidently, the same day I received my first alert from Experian's FreeCreditReport credit-monitoring service (see yesterday's post here), the company revamped its website's account-management area. The thing you notice right away is the focus on upselling subscribers to the new ChildSecure family plan (see first screenshot below).  

The cost is an extra $6.95/mo, which seems like a good value, considering that you can cover all your kids with a single fee. But the total monthly fee on my plan rises to an eye-popping $18.95/mo or $227 annually. That's a significant investment and hard to justify unless you've previously been burned by fraud (for more on the price/value equation, see our Online Banking Report on the subject published in August).  

Screenshots (24 Oct. 2007)
Logging in yesterday, I was greeted with this popup in front of the grayed-out main page.

They also sell it in a huge banner across the top of the main page and a tab for the ChildSecure option.

Finally, here's the page you see after clicking on ChildSecure tab.

Here's the email sent yesterday announcing the website redesign:

Today I received my first alert (see screenshot below) since subscribing to Experian's credit-monitoring service about 4 weeks ago. While I appreciate the heads up, the user experience is not at all what I want.

Here are the problems: 

1. Cries wolf. All the alert tells me is that there was a "key change" posted to my file. Is it a routine credit inquiry (which I was expecting) or did someone just open an account at Best Buy in my name? The only way to find out is to log in to my FreeCreditReport account, which took three minutes since I couldn't remember the username/password. Please provide more info in the alert so I can better gauge the severity of the situation.

2. Not phish proof: While Experian does use my first and last name in the salutation, thereby improving believability, additional personalization is needed to help users know it's genuine, especially when the company's log-in process requires input of a social security number confirmation after login. 

3. Not enough trust: I've worked with Experian for more than a decade so I know and trust them. However, the average Joe/Jo doesn't really know whether FreeCreditReport is a trustworthy company or not. Credit monitoring alerts are too easy to miss if they don't come from a recognizable and trusted name. It would be much better if they came from the user's financial institution or card issuer, someone with whom they do business on a monthly basis, so the emails don't end up in some spam filter.

4. Not integrated with online banking: I really don't want to remember yet another username and password, nor do I want to spend five minutes of my day logging into another website to verify there are no criminals using my credit files. Credit monitoring and credit scores should be integrated into online banking so I can keep track while doing my normal banking.

5. Doesn't tell me what to do: In this particular case, I knew about the inquiry, but what if I didn't recognize it. The website doesn't provide any info on what to do if I did not authorize the inquiry, which could be the first sign of serious identity takeover (see screenshot below).

For more information, see our recent Online Banking Report on Credit Monitoring Services here.

Email alert from Experian's FreeCreditReport service (24 Oct. 2007)

When it comes to generating incremental fee income, it's difficult to find new ideas. One you may not have considered is automobile title insurance.

Although we've purchased two used cars on eBay, we'd never heard of title insurance for autos until we read about it in the Wall Street Journal today. For a one-time fee of $50 to $60, consumers can buy insurance that protects them against fraudulent titles, including instances where a salvaged auto has had its title wiped clean by registering the vehicle in a state with more liberal salvage rules.

According to First American Corporation, which markets a $49.95 policy in a joint venture with Experian Automotive, 20% of salvaged autos end up with clean titles. The product is called TitleGuard Vehicle Title Insurance and is sold through a stand-alone website <autotitleguard.com> and through resellers such as Credit Union Direct Lending and Escrow.com.

Financial institution opportunities
There are two ways financial institutions could use title insurance:

1. Education: In your auto-loans area, explain the ways that car titles can be manipulated with links to outside informational sources.
2. Resell title insurance: Title insurance is most needed when purchasing vehicles from unknown private parties. Even if you don't finance such transactions, you could earn commissions on customers referred to third parties for title insurance.
3. Bundle title insurance with loans: If you offer financing for private transactions, you could bundle title insurance with your loan to help differentiate your product and help justify premium pricing. The title insurance could be mandatory or optional and either way could be priced as a fee-based add-on or included in the regular loan-origination fee.

In thousands of searches using Google and other search engines, I've succeeded in stumping them a few times, receiving no results on my search expression.

However, today I saw something I'd never witnessed before. A Google search for "VantageScore," the new joint credit score from Experian, TransUnion, and Equifax (NetBanker March 14) returned the following (click on the inset for a closeup):

• Zero mentions of the term
• Two ads placed against a search term that returned zero documents (click on inset for closeup).

But I guess it had to happen: savvy credit report marketers are moving faster than Google's spider to lay claim to a new term.

--JB

FUD (fear, uncertainty, and doubt) is a strong motivator, especially when it has something to do with your personal financial situation.

As much as financial institutions strive to maintain the perception of safety and soundness, they often benefit from the concerns and resulting risk-averse behavior of their customers.

Case in point: credit reports and identity theft protection. Sure, it's relatively simple to request a credit report every six months to make sure the credit bureaus have accurate info on file under your name. The problem with this approach: it takes time, you must pass rigorous authentication tests each time, you have to remember to do it proactively, and once you successfully access your report, you have to figure out what it all means.

One of the more confusing aspects of the credit report world is the various credit scores available. Each of the three major credit bureaus offer a proprietary score, but the most common one, used by 75% of mortgage originators, is from Fair Isaac, whose FICO score is almost a household word.

The new VantageScore is designed to simplify the confusing credit score landscape. Released today, it's a joint effort from the three major credit bureaus, Experian, TransUnion, and Equifax, who worked together to create a single score incorporating information in all three databases. The new product will be marketed by a separate entity, VantageScore Solutions LLC, <vantagescore.com> a joint venture from the three companies (click on inset for a closer look).

Rather than the 800-point scale in use today, the VantageScore will use a more common academic letter-grade scale as follows:

900-990 A
801-900 B
701-800 C
601-700 D
501-600 F

Analysis
While it should help bring more clarity to the credit score in the long term, the immediate effect is more confusion with a new name, additional marketing campaigns, and a new grading scale. This should be good for financial institutions that can use the raised awareness and heightened concerns to sell their own credit-monitoring services, which can be a solid source of monthly fee revenue.

We'll be taking a close look at the market during the next six weeks as we research and author an update to our 2002 analysis of the credit report-monitoring opportunity (refer to Online Banking Report #83/84).

--JB

Before: Experian began making credit reports available over the Internet for $8 at www.experian.com/product/consumer/online.html.

After: A few days later, Experian was forced to shut down the service indefinitely due to a technical glitch which sent credit reports to the wrong users.

The good news. Experian was the first of the big three credit bureaus to offer online access to credit reports at www.experian.com. The (really) bad news. They were forced to shut down the service after only a few days due to a highly embarrassing technical glitch that misdirected credit reports to the wrong online requester. The online credit reports do not contain full account numbers so the glitch isn’t as bad as you might of have thought. Naturally it made headlines around the country throwing more cold water on the coals of electronic commerce.

The silver lining in all this? A small start-up company, QSpace www.qspace.com, is doing what Experian tried to do, but in a more secure fashion using VeriSign’s class 2 digital certificates to verify user identity. QSpace had been advertising a $7.50 special for the digital certificate (good for one year) and credit report (with subsequent purchases costing $3). But with Experian’s temporary exit, QSpace upped the price to $12 (and $5 for credit report reorders). QSpace says they were merely passing on an increase in the wholesale cost of digital certificates from VeriSign (which also retails digital certificates for $19.95).

QSpace’s version of “Netscape Now.” Click on the button to link to the Internet Credit Report order form.

QSpace provides a “free” copy of your credit bureau report online, but you have to buy a VeriSign class II digital certificate for $12.

QSpace delivers online credit reports (from Experian’s database) under the trademarked name Internet Credit Report. Users must have a class II digital ID from Verisign for authentication. You earn a free credit report by buying the digital ID online through Experian. QSpace has posted an excellent FAQ on credit at www.qspace.com/questions/faq_all.html.  Privately held QSpace began operations in Oakland, CA in August 1996.
Contacts: I.O.A. Eze is Co-Founder & President; Arash Saffarnia is Co-Founder & CTO; Peter C. Balas is Founding Investor, 510.893.1085.