Is LendingTree legit? Is LendingTree safe? Those questions and more will be covered in this article:

  • Is LendingTree legit legit?

  • How does LendingTree work?

  • Is LendingTree safe?

  • Common LendingTree complaints and praises

  • Does LendingTree run your credit?

Is LendingTree Legit to Use?

It should be stressed that when dealing with companies that have business models like this that the buyer beware. Interested parties should review how these kinds of businesses actually make their money and then decide if the convenience is worth having their personal information sold to various bidders…

LendingTree (formerly known as Tree.com) is one of the original dot.com start-up companies during the tech boom of the late 1990s. The company has had a relatively convoluted history, changing hands and rebranding itself multiple times. Doug Lebda, the company’s founder and CEO, came up with the idea of LendingTree in 1996 after a long and arduous search to secure a competitive mortgage for his first home, and officially launched LendingTree in 1998. In 2003, the company was bought by IAC (who owned other online businesses like Ticketmaster.com). However, after the housing crash of 2008, the LendingTree brand was spun off under the umbrella Tree.com, Inc. and rebranded itself back under the LendingTree name in 2014.

LendingTree’s stated purpose is to act as a market in which various lending institutions compete with each other for customers. The areas of finance it operates in include: Automotive, Education, Mortgages, and Lines of Credit. LendingTree brands itself as “a leading online loan marketplace with one of the largest networks of lenders in the nation” and offers various online informational sources such as financial calculators and mortgage coaching. LendingTree also encourages its customers to create an online account for access to such features as credit score checks and live personal loan quotes. On top of that, LendingTree does this all at no charge to people seeking financing. Is LendingTree legit? It’s starting to look like it…

How does LendingTree work?

To use LendingTree’s services, a customer provides them with personal information which may include but is not limited to the following:

  • Telephone number
  • Home address
  • Social Security Number
  • Residential history
  • A list of personal assets
  • Employment and income history
  • A list of personal debts
  • Demographic and online activity data

Once the information is provided, LendingTree uses that information to match the customer with a financial institution and if a match is successful, the customer and the financial institution continue on from there on their own.

So is LendingTree legit? Seems legit, right? But if one should take a closer look at exactly how LendingTree generates revenue, things get a little shady (get it? because LendingTree…). LendingTree’s website explains to potential customers how it makes money like this:

“Lenders pay us for the chance to compete for your business. We pass your profile to up to five lenders who then provide you a customized loan offer based on your request. LendingTree is completely free to use, but of course if you decide to take out a loan you will be responsible for any processing fees, closing costs, or other fees as normally required by the lender.”

Which implies that financial institutions pay a fee for access to the entire network of customers and LendingTree does the matchmaking. This is how LendingTree brands itself, and for most potential customers it doesn’t warrant a second glance. However, if one were to look at how LendingTree describes how it makes money in its 2014 annual report to its shareholders, it would look like this:

“LendingTree does not charge consumers for the use of our services. Revenues from our mortgage products are derived from upfront match fees paid by marketplace lenders that receive a lead. Because a given loan request form can be matched with more than one marketplace lender, up to five match fees may be generated from a single consumer loan request form. Revenues from our non-mortgage products are derived from upfront match fees paid on delivery of a lead and for some marketplaces outside mortgage, other kinds of fees, such as closed loan fees.

Which paints quite a different picture. Therefore when investigating “How does LendingTree work?” it seems LendingTree has two separate answers. One for customers and one for the board. Contrary to what it implies to potential customers, LendingTree does the matching first, and then sells customer financial information to up to five separate institutions. That means LendingTree can profit up to five times from a single customer, and that the service LendingTree is actually selling is customer information. LendingTree is doing nothing illegal by engaging in this sort of activity, and as it turns out, selling customer information is quite lucrative. In Q4 of 2015, LendingTree made $78.3 million in revenue, which is a 78% increase over Q4 of 2014.

Another issue with LendingTree’s business model is that the financial institutions that use LendingTree’s services are the ones that are so in need of customers/clients that they are willing to pay a (potentially exorbitant) fee in order to obtain them. This logically would exclude successful or established lending institutions since those institutions would have a large pool of customers from which to pull from due to demand for their services and would not need to pay LendingTree for customer information. Because of this, LendingTree’s assertion that lending institutions are actually competing for customer business rings hollow. LendingTree’s 2014 annual report confirms this with the statement that only two financial institutions contributed to nearly a quarter of LendingTree’s total revenue for the three years ending in 2014:

“For the years ended December 31, 2014, 2013 and 2012, one marketplace lender accounted for 13%, 12% and 14% of total revenue, respectively, and another marketplace lender accounted for 11%, 12% and 11% of total revenue, respectively.”

LendingTree does perform certain integrity checks on financial institutions it sells information to, but those checks are mainly to mitigate LendingTree’s exposure to risk, as opposed to ensuring that its customers are not getting a raw deal:

“We perform certain due diligence procedures on prospective new lenders, including screening against a national anti-fraud database maintained by the Mortgage Asset Research Institute, which helps manage our risk exposure. The data is utilized to determine whether a lender and its principals [sic] are eligible to participate on our marketplace and have not been convicted of and/or penalized for fraudulent activity.”

That being said, LendingTree takes no personal responsibility for what happens with a customer’s personal information after it sells that information to a financial institution, and depending on the situation, the customer may not be aware that the financial institution has their information at all:

BE AWARE that the Lenders with whom you are matched may retain or use your Information whether or not you use their services and you should contact these Lenders directly concerning their privacy and information sharing practices which may differ from LendingTree.”

Further, there have been incidents where customer information has been leaked from LendingTree and given to third parties without customer consent. In 2008 LendingTree filed a lawsuit suing some of the financial institutions it worked with for using a leaked LendingTree password to obtain customer information:

“Based on our investigation, we understand that these mortgage lenders used the password to access LendingTree’s customer loan request forms, normally available only to LendingTree-approved lenders, to market loans to those customers”

The number of customers affected remains undisclosed, but LendingTree asserts that no cases of identity theft have occurred. How does LendingTree work? Not so differently from other companies. Do not worry. Is LendingTree legit? Yes.

Is LendingTree Safe?

When it comes to online security, LendingTree does not provide more than the mandated level of security against cybercrime to protect customer information in its networks. According to LendingTree’s security page, LendingTree uses Secure Encryption (HTTPS) and firewall protection for its networks. Whether or not this is an adequate level of security for the information provided is at the discretion of the customer, but it should be noted that the FDIC (Federal Deposit Insurance Corporation) points out that cyber criminals can and do take advantage of multiple vulnerabilities that may bypass firewall protection. So LendingTree is safe to use on a basic level but it’s also safe to use regarding your information privacy as described in earlier paragraphs.

Common LendingTree Complaints and Praises

As dire as all this sounds, many customers are perfectly happy using LendingTree. It does provide convenience for financing options and the majority of its interactions complete without issue. According to Consumer Affairs, LendingTree scores 3.8/5 with a 35% 5/5 rating. People satisfied with LendingTree cite the website’s ease of use, convenience, and finance option choices as the top reasons for their positive experience.

LendingTree Complaints Not Centered on Credit Tended to Focus on One of the Following Two Issues:

1) Customers would receive inordinate amounts of calls from multiple institutions ranging from immediately after signing up to long after they deactivated their account.

2) Customers were upset that they entered personal information that they did not want disseminated, but it was anyway.

These complaints stem from LendingTree’s business model as described above. Because LendingTree makes money off customer information by selling it to institutions that are desperate enough to pay LendingTree a fee for that information, it would follow that institutions calling customers incessantly would be a natural consequence. Further, because LendingTree takes no responsibility for personal information after it sells that information to a financial institution, it is likely that unless the customer follows up with that institution, the customer’s information could be used in a manner that they did not originally intend it to be used. Now let’s look at any LendingTree complaints related to credit:

Does LendingTree run your credit?

Of the negative reviews, a number of them centered on credit score checks. While LendingTree does occasionally run credit checks on customers, those are “soft” checks, and are only completed after you consent. That being said, when LendingTree sells customer information to financial institutions, those institutions may run “hard” credit checks to determine eligibility for a loan or other service. Hard credit checks can lower your credit score by anywhere from 3-10 points so take this fairly seriously. LendingTree asserts that this won’t hurt a customer’s credit score due to the fact that FICO considers multiple credit checks in a short amount of time (14 to 45 days depending on the formula used) as a single check. This is corroborated by FICO itself. However, a customer must accept one of the offers before the time period expires or their credit score will be affected. Does LendingTree run your credit? Yes but credit scores are generally not affected.

Final Thoughts on Whether or Not LendingTree Is a Legitimate Brand

Is LendingTree legit? Is LendingTree safe? Yes and yes. But it should be stressed that when dealing with companies that have business models like this that the buyer beware. Interested parties should review how these kinds of businesses actually make their money and then decide if the convenience is worth having their personal information sold to various bidders. Since you’ve done that, you can move forward with using LendingTree. LendingTree is legit.