Beware of so-called free credit report sites

Looking for a free credit report from monitoring groups like FreeCreditReport.com? Think again.

The site's TV ads feature slackers singing in their shabby apartments or waiting tables in pirate costumes. If only they had used FreeCreditReport.com, they wouldn't be in such a financial mess.

It also has a Web site name that implies the report is free. Contrary to its misleading URL, FreeCreditReport.com charges a credit-monitoring service that costs $14.95 a month, automatically taken from consumers' credit cards.

The Federal Trade Commission isn't amused. The government is now producing its own spoofs on FreeCreditReport.com singing, "Other sites may turn your head; say they're free, don't be misled. Once you’re in their tangled web, they’ll sell you something else instead.” In the parody, the F.T.C. is focusing on the free-credit-report slogan.

Experian, the company that owns FreeCreditReport.com, has already paid $1.25 million to settle charges for misleading consumers who ended up having to pay a monthly subscription fee. Due to the legal issues, it now has a disclosure on its home page saying it's not affiliated with the annual free credit report program. This disclosure is in fine print on the side of the home page, on a subdued background.

FreeCreditReport.com diverts consumers from the government-mandated free credit report site, and are drawing a lot of F.T.C. attention. This expanding niche is near $1 billion in sales for which millions of people have signed up. The consumer pays to see real-time updates about changes in their credit.

But for most consumers, changes in credit can be easily monitored by a quick peek at their credit card statement every few months. Edgar Dworsky, founder of ConsumerWorld.org and a former member of Experian's consumer advisory panel asks, “Does the average person really need to see their credit reports more than once every four months? Do you need to look at it daily?” He responds to his own question, "That's paranoia."

The three major credit bureaus, Experian, Equifax and TransUnion are required to offer reports through the authorized AnnualCreditReport.com but the three groups also make money from their own credit reports.

According to a Yahoo Finance article, Experian is the largest player for credit card monitoring, and their market share is more than twice that of its three main competitors combined. The company invests heavily in marketing and its slacker commercials. In 2008 alone, $54 million was spent, TNS Media reports.

Looking for an alternative? Credit Karma, a site that helps consumers demystify the credit-score game, boasts free credit checks, educational guides and tools.

For more information, click here.