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Free FICO scores lead to more responsible card users

Kelly Dilworth

Before my husband had free access to his credit score, he rarely talked about his credit. Until a few months ago, when he started accessing his score through his credit card issuer, he only pulled his credit report once out of curiosity and never purchased his credit score.

He figured his credit must be fine since he always paid his bills on time. “I intended to check it regularly,” he says, “but I never got around to it.

But now that checking his credit is more convenient, he’s monitoring his credit more regularly and paying closer attention to what influences his score. “Every time I log into USAA, it’s there and it’s fun to just glance at it,” he says. The portal run by USAA and Experian shows him exactly what’s boosting his credit score and what’s dragging it down. It also lets him test what would happen to his score if he applied for a new loan or paid off all his debt.

He says it’s helpful to know what’s going on behind the scenes and to know what he can do to positively influence his score, even if there are some factors – such as the age of his oldest account – he can’t change. “It made it more accessible. It made me feel like something I have some control over,” he says.

According to a September 2015 discussion paper from the Federal Reserve Bank of Philadelphia’s Payment Card Center, my husband’s not the only one whose access to free credit information has suddenly piqued his financial curiosity.

More responsible with credit?
The Fed’s September 2015 paper outlined some findings of issuer Barclaycard after it, too, gave cardholders free access to credit scores. Like USAA, Barclaycard shows people their scores only when they log into their Barclaycard account. It also lists some of the variables influencing consumers’ scores and shows how their scores have fared over time.

Internal data comparing cardholders who accessed their scores and cardholders who didn’t, found consumers became significantly more engaged with their Barclaycard account after they began viewing their scores.

Among the nearly 1.5 million Barclaycard holders enrolled in the free FICO score program, 84 percent of cardholders now view their credit score at least once a month. The percentage of cardholders who’ve begun using online and mobile banking services has also increased.

Meanwhile, those who enrolled in the free credit score program appear to have subtly changed how they handle credit, often for the better. “In addition to showing improved consumer digital engagement and satisfaction, customers enrolled to receive free access to FICO scores performed better with their credit cards,” wrote report author Vyacheslav Mikhed.

For example, cardholders with lower credit scores began breaking with tradition and used less of their total available credit – a key credit scoring metric. “These customers traditionally have very high utilization rates,” wrote Mikhed. Because high credit utilization may have been a factor listed as contributing to a lower score, Mikhed speculates that these cardholders may have started charging less or paying down their debts more aggressively in order to improve their scores.

Meanwhile, those with higher credit scores didn’t appear to change their overall utilization rates, but Mikhed thinks that’s probably because their credit limits were so high, it wasn’t listed as a negative factor.

Similarly, enrollees in the free credit score program tended to make fewer late payments than cardholders who didn’t enroll. However, Mikhed admits that may be at least partially due to selection bias, with more responsible people choosing to enroll. “Despite this caveat, the delinquency rates of the program participants stay below the rates of non-enrollees even nine months after the time of enrollment.”

Surprisingly, free access to credit information didn’t limit cardholders’ appetite for spending, so access to free scores may not benefit everyone’s credit scores. Instead, cardholders enrolled in the program tended to spend more, on average, than cardholders who weren’t enrolled. That may also have been due to selection bias, says Mikhed, but the difference is still significant, he says. “The FICO score program does not reduce monthly purchases made by program participants and may even increase them.”

Your bottom line
If your credit card issuer offers a free credit score, you may find that just by viewing your credit score more regularly, you’re inspired to improve your credit behavior.

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