I
recently took a hard look at Credit Sesame, which is an
interesting web site that offers credit monitoring, credit
cards and mortgages. The site views them as inter-related
parts of a whole, where credit monitoring suggests
opportunities to improve the user’s financial status by
changing the composition of credit cards and/or refinancing
a mortgage.
The
credit-monitoring function is difficult to assess without
getting deeply involved in its use, which requires a
commitment I couldn’t make. I am awaiting feedback from
readers who have used it or plan to. Meanwhile, I can assess
the credit card and mortgage parts of the site viewed as
separate lines of business.
Credit Cards
Credit cards
are simpler, and also a lot more complicated than mortgages.
They are simpler in that pricing is based mainly if not
entirely on credit score, monthly purchases, and on whether
the user carries a balance, as opposed to the much longer
list of factors involved in mortgage pricing. Credit cards
are more complicated in that they are subject to a variety
of small print provisions covering the APR, balance transfer
fees, annual fees, cash advance fees, late payment fees,
grace periods, rewards, and on and on.
Credit Sesame
deals with these two aspects of credit cards by recommending
the specific cards that will minimize cost to the user,
based on the user’s credit score, purchase volume and
balances, while also showing all the small print provisions
for every card. That is about as much help as a credit card
shopper can expect.
Mortgages
Readers should be
aware that Credit Sesame’s mortgage network competes with
mine, which could affect my judgment despite every effort to
be fair.
This is one of
the few sites that attempts to provide useful decision
support to borrowers selecting from among the different
types of mortgages. The technology used to select and
display the best mortgage is slick, especially the ability
to select the mortgage type and rate on a chart, and have
the performance data for that mortgage pop into a table
opposite. Unfortunately, the site is sloppy with many of the
critical details involved in the process.
On a
refinance, the most important metric provided to mortgage
borrowers is “Savings Over N Years”, where savings are
relative to the existing mortgage, and N is the most likely
life of the mortgage. The components of “Savings” are not
shown but we are told that only payment reduction and
balance reduction are included. This leaves tax savings out
of the picture, which would make the total larger. And it
leaves out lost interest and upfront costs, which would make
the total smaller. The last omission is particularly
troublesome.
On a purchase
mortgage, “savings” relative to the existing mortgage is
replaced by the “true cost” of the different new mortgages,
but again, only a total is shown. The popup that explains
what is in the total is incoherent, and nothing is said of
balance reduction or tax savings, which are important
components of a true cost that is really true.
Closing cost
data are shown as a single total with no breakdown, so the
borrower has no idea what is covered and what isn’t. Lender
charges are not distinguished from third party charges. A
slider allows the user to change closing costs by trading
off points charged by the lender against the interest rate,
which is slick but useless when you don’t know what the
closing cost figure covers.
Borrowers
considering an adjustable rate mortgage (ARM) are told
nothing about the ARM that bears on the risk of future rate
increases.
In each box
that shows the true cost and other features of a particular
mortgage there is a “Learn More” button, which I expected to
give me the detail for which I was looking. Instead, it took
me to a page which identified the lender providing the
mortgage I had selected, with a form for me to fill out to
make contact.
Every site of this
sort including mine leads the user to a point of contact
with a lender, but this site’s way of doing it is sneaky.
