- We had a client pull their personal credit bureau
from three free credit bureau agencies,
then get it from their online banking app
and buy it from both Equifax and TransUnion,
and then we pulled the one we would use
to actually get them a mortgage
and you aren't going to believe
which one had the best score.
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Okay, so this might be the most interesting video
in the history of this channel.
We had a client who was applying for a mortgage,
do us the favor of going through
and ultimately doing you the favor of going through
and applying to get his free credit bureau online
from three of the free credit bureau agencies.
And then also getting it through his online banking app,
and getting it from Equifax and TransUnion directly.
And then we compared it directly
to what we pull in order to actually get him a mortgage.
And the outcome is pretty surprising.
You won't believe which one had the highest score.
So let's get started by talking
about the three free credit reports
because what we did is we had him go
to Credit Karma, (bell dinging)
Borrowell, and Mogo
and use their three credit reporting services
in order to determine what his credit score would be.
So Credit Karma uses the TransUnion credit bureau system
and Borrowell and Mogo use Equifax's Risk Score Version 2.0.
So we had our client pull his credit bureau
from Credit Karma,
and immediately once he had his credit score,
which was 865, really good score by the way,
they started offering him credit card offers.
Now that was really interesting because
before they showed him his credit report, his trade lines,
anything else that had to do with this credit,
they were immediately serving him up offers
for credit cards and loans.
And let's be clear here,
these three free credit reporting services,
they're all using credit bureaus as a loss leader.
So in other words,
what they're doing is they're giving your credit score
for free, which costs them money,
in order to sell you products.
And how it works is they give you credit score,
then they offer you up offers
for credit cards, loans, mortgages, all sorts of things,
in the hopes that eventually you will get a product
with one of their partners,
and then as a result, they will receive a referral fee.
Really simple system, really simple business model.
You're the product, they're selling you to somebody else.
Now, the second company that we went to is Borrowell,
and Borrowell uses Equifax's Risk Score Version 2.0,
just like Mogo does.
And again, same sort of thing.
We were able to pull the client's credit score
and ultimately he got a score of 826.
So slightly lower than the TransUnion number
that was received from Credit Karma.
And the thing that struck us
when the client went to Borrowell was
he was immediately served up recommendations.
And this is interesting
because the first recommendation he was offered was
a BMO Infinite Privilege card.
So this is a very expensive, very high end card.
It comes with a $500 fee and a 20% interest rate,
and it is a high end product.
And ultimately it was being delivered as a recommendation,
not as a offer, which to us was kind of deceiving
because if Borrowell is telling their clients
that this is a recommended product,
then what a client may perceive is that
that product is going to increase their credit score.
And that isn't necessarily the case.
In fact, it could have the opposite effect.
Their credit score could go down
because they're going to have
to have a hard credit bureau pull in order
to get the actual credit card.
And then obviously, depending on how they use the card,
it could decrease their credit score.
So kind of a little bit misleading.
We didn't really love that, but hey,
that's the nature of the beast.
Obviously, Borrowell is there to sell people
who are getting their free credit score something.
That's how they make their money.
And that's exactly what they were doing in this case.
And then we went to Mogo,
and Mogo had a little bit of a different business model.
They weren't from loading other people's credit cards,
or other people's mortgages, or anything else like that.
What it seemed like they were trying to do was
to build a relationship with a potential client
by giving them their free credit score
and identity protection, and stuff like that,
identity monitoring.
I can't remember exactly what the word
that they use for it was.
But ultimately, what it seemed like
they were trying to do was to sell Mogo related products.
So things like a secured visa card
where you can put a thousand dollars on the card
and then use it like it's a credit card,
which if it's being reported
to your credit bureau can actually be a really good way
to increase your credit score,
if you don't have one.
And then things like their cryptocurrency product,
as well as a mortgage product that appears
that Mogo is licensed as a mortgage brokerage,
and ultimately offers mortgage products
of different companies.
So, a little bit different business model here
where they're trying to build a relationship.
My guess is at some point
they're gonna try to become a mortgage lender
or build out some sort of other lending product
that is direct to consumer, but again,
still using the client as the product
in order to sell something to that client.
Now, just like with Borrowell,
the credit score for the client was 826.
Again, using that same Equifax scoring model.
What was interesting was,
not only was the client being served up offers
by all three of these companies,
but as soon as he finished with the three apps,
he ended up getting a ton
(camera shutter clicking) of online advertising
for credit products through Instagram, through Facebook.
Obviously one of these companies,
or all three of these companies was using
a Facebook ad pixel and immediately on his Instagram
and his Facebook accounts,
he was being served up all sorts
of ads for different types of credit products.
So that's definitely one of the drawbacks
of one of the free credit reporting companies is
that you almost immediately end up getting served
advertisements for more and more products,
which could, if you were susceptible to that advertising,
end up having a negative effect on your credit.
And one of the things we really fear is
when somebody goes in and starts looking
at their credit and wants to monitor it,
well, if they're constantly getting served up ads,
the temptation's there,
and if it's the type of person who isn't necessarily good
at managing their credit, well,
that temptation could lead to more borrowing
and more trouble, and just an overall bad scenario.
Now, the fourth place that we went
to get a credit bureau was BMO,
because what we didn't know when we made our last video
on credit was that most of the mobile banking apps
actually have the ability to get your credit bureau
from TransUnion.
Of the five major banks,
four of the five we've confirmed have this.
The one that doesn't is TD.
Come on TD, get your act together.
You're the preferred bank of millennials,
give us the ability (laughs) to get our credit score
from our online banking app.
Come on.
But the other four definitely do allow this,
which makes Mogo, Borrowell,
and Credit Karma virtually irrelevant
'cause if you can get it from your online banking,
why the heck would you go to another third party service
who's just gonna serve you up ads in order to get it?
So when our client pulled his credit bureau
using the online banking app from BMO,
he got the same credit score that he got
from Credit Karma because BMO was using the TransUnion app
and ultimately got an 865 score again,
which was interesting.
Two apps, both using TransUnion, both got the same score.
So then our client went directly to transunion.ca
(bell dinging) and paid the 19.95
to get his credit score directly from them.
And interestingly enough, lo and behold,
his credit score was again 865.
So congratulations TransUnion.
Pulled from three different places,
all using TransUnion's bureau
and ultimately giving the same score
to the client across the board.
We thought that was really cool.
Now with TransUnion, when you pay that 19.95
it is an ongoing monthly subscription
for both your credit score
and for some sort of identity protection.
Take a look at that,
if you do sign up for it,
to make sure that you aren't getting billed monthly
for something that you don't need.
I'd highly recommend, since you can get it
from your online banking app anyways,
using your online banking app
and canceling your TransUnion account,
but that is completely up to you.
So this is where it gets interesting
because this is now the sixth place
where we're going to go to get our credit score.
And in this case, the client went directly
to equifax.ca. (bell dinging)
And with equifax.ca you have the ability to pay the 19.95
for ongoing credit monitoring and your ongoing credit score.
Or, if you dig deep enough,
you can get your credit score for a one-time fee of 23.95.
But if you dig even deeper,
during this whole coronavirus COVID thing
Equifax has offered to give you your credit bureau for free.
Now, if you use the free service
you don't get to see your score
but you can see what's actually on your credit bureau.
But in this case,
we wanted to see what the actual score was,
so we had our client pay the 23.95
and when he pulled the score we were shocked,
because the score that came out was 766.
60 points lower than both Borrowell and Mogo,
who use an Equifax product.
Now, Equifax is clear in the fact
that there's all sorts of reporting models that they use.
In some cases, you will get a higher score,
in some cases you will get a lower score,
but we found it interesting
that when you use third party services
and TransUnion for what's deemed their educational scores
you got the same score, but when you use Mogo, Borrowell
and Equifax for their educational scores
that the number wasn't consistent across the board.
And in fact, in this case
if our client would have bought his credit score directly
from Equifax first, he would have thought
that his credit score was far worse than what it is.
Now in this case,
because it was 766, well above average,
in fact excellent, doesn't really make a big difference,
but let's say that this was a normal and typical consumer.
What if his score had been 666
and he had done all sorts of research
and been told that if his beacon score wasn't 680,
he wasn't going to be able to get qualified
for as much for mortgage or for certain products?
Well, he may not have actually applied for a mortgage.
And the reality of it is,
is when we pulled his credit score,
his score was even higher
than it was with both Borrowell and Mogo.
In fact, his BEACON 9 score, which is the most
up-to-date credit score out there was,
get this, 863, just two points off of
what TransUnion had given him.
In fact, his credit score that would have been used
by most lenders in Canada
to get him a mortgage was significantly higher
than the credit score that Equifax had given him.
So if he had a lower score and ended up getting discouraged,
he may have not have actually applied
for a mortgage, which we think is interesting,
and something that maybe Equifax should be looking at
down the road when they look
at their consumer purchase credit products.
So why was the current score that we used so much higher
than the other ones from Equifax,
the Borrowell, the Mogo,
and the one bought directly from Equifax?
Well, the reason why is
because we use what's called BEACON 9,
which is the most up-to-date credit reporting system
in Canada, and it is set up and designed for today's times.
So what that means is that it's designed to look
at things like secured lines of credit differently
than it would at unsecured lines of credit,
which wasn't something that was
in the previous versions of the Equifax scoring systems.
So in this case, this client had very low debt,
very low credit card debt, had unsecured lines of credit
but wasn't using them, but then had one line of credit
that was secured against this property.
It was almost maxed out to the limit
because he uses it for investments.
And ultimately in the previous scoring systems,
that would be looked upon in a less favorable light
because it is a credit facility that was run
up to the limit.
And in BEACON 9, my understanding of it would indicate
that in a secured line of credit sort of scenario
it isn't looked at in the same way
as it would have been looked at previously.
So the old credit bureau scoring
and the old reporting that was both
on Mogo and Borrowell's system and
on Equifax's direct to consumer product
probably looks at that
as if it's a fully drawn down line of credit
and that's a negative,
but the newer scoring system probably looks
at it in a slightly different manner,
as it is secured and being used by somebody
who has large amounts of credit available to them,
but manages it very well.
So what's the moral of the story on this whole thing?
Well, moral of the story is this.
Well first, you can't be sure based on
what one company tells you your credit score is
that that is actually the credit score
that's going to be used in order to get you a loan.
Second thing is your credit score
that's used to get you a loan
may actually be considerably higher
than the one that you get directly
from Equifax, or the one that you get from Borrowell,
or Mogo, or from Credit Karma, or from TransUnion directly.
And third is, if you're using a free credit score program,
a free credit score company, a free credit score app,
understand that if they're giving it to you for free,
you are the product
and they are going to try to sell you something.
So use companies like Credit Karma, Mogo, Borrowell,
your BMO online app,
or whatever bank that you use's online app,
use those as tools to help improve your credit,
monitor your credit,
make sure it's not going down,
but ultimately you aren't going to know
what credit scores is used to get you a loan,
to get you a mortgage, to get your credit card card
until such time as you actually apply for one.
And here's the moral of the story.
Only apply for credit when you need it.
Don't do it because Borrowell, or Credit Karma,
or Mogo tells you that you should be applying
for a product, or because they make a recommendation
or an offer to you.
Only do so if you absolutely need to apply for credit,
or if you need to build credit.
Otherwise, use these tools as monitoring services
and as nothing more.
So if you've got questions
or comments on how credit works,
do me that favor,
put the comments in the comment section below.
I'll get to them as fast as I possibly can,
and do me that other favor, hit that Subscribe button,
hit that notification bell, and hit the Like button
so more people like you can see this video,
and ultimately I hope to see you on the next one.
Cheers.