LendingTree acts as a marketplace in which various lending institutions compete with each other for customers. But is LendingTree legit? And is it safe to use?
LendingTree is a legitimate company, founded during the dot-com start-up boom of the late 1990s.
Founder Doug Lebda created the company after purchasing his first home and realizing how difficult it could be to find the right loan.
LendingTree has since grown into one of the largest online loan marketplaces in the U.S.
However, because it is a marketplace and not a direct lender, LendingTree’s business model is built on sharing applicant information with other companies.
Below, we explain exactly how LendingTree works and whether it’s safe to allow LendingTree to share your information.
How LendingTree Works
LendingTree partners with lenders in the areas of automotive loans, education, mortgages, and lines of credit, allowing lenders to “compete” for the borrower’s business.
It also offers various online resources for borrowers, such as financial calculators and mortgage coaching. It doesn’t charge potential borrowers any fees for its loan-matching services or resources.
To use LendingTree’s services, you must provide your personal information, including:
- Telephone number
- Home address
- Social Security number
- Residential history
- List of personal assets
- Employment and income history
- List of personal debts
- Demographic and online activity data
LendingTree uses that information to match you with potential lenders. If a match is successful, the customer and the financial institution continue the lending process from there without LendingTree’s involvement.
Does LendingTree Run Your Credit?
LendingTree does occasionally run credit checks on customers, but it runs a “soft” check, and only after you give consent.
However, when LendingTree provides your information to other financial institutions, those institutions may run “hard” credit checks to determine eligibility for a loan.
Hard credit checks can lower your credit score anywhere from three to 10 points.
LendingTree asserts that this won’t hurt a customer’s credit score because FICO considers multiple credit checks in a short amount of time (14 to 45 days, depending on the formula used) as a single check. FICO corroborates this.
But, keep in mind that the customer must accept one of the offers before the period expires or their credit score will be affected.
Is LendingTree Safe?
When it comes to online security, LendingTree doesn’t provide more than the mandated level of security to protect customer information in its networks.
LendingTree uses Secure Encryption (HTTPS) and firewall protection for its networks. Whether or not this is an adequate level of security is at the discretion of the customer.
Still, it should be noted cybercriminals can and do take advantage of multiple vulnerabilities that may bypass firewall protection.
Data breaches are always a risk when entering your personal information online; there have been previous incidents where customer information leaked from LendingTree to third parties without customer consent.
In 2008, LendingTree filed a lawsuit against some of the financial institutions it worked with for using a leaked LendingTree password to obtain customer information.
How Does LendingTree Generate Revenue?
LendingTree doesn’t charge any fees to the customer who is seeking a loan.
LendingTree’s website explains to potential customers how it makes money: it passes each customer’s profile on to up to five lenders, who pay for access to the customer’s information.
By selling customer financial information to up to five separate institutions, LendingTree can profit up to five times from a single customer.
While LendingTree is doing nothing illegal by engaging in this sort of activity, consider the institutions that will be willing to pay for such leads.
The model excludes highly successful and established lending institutions; those companies don’t generally need to pay a third party (such as LendingTree) for customer information or leads.
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 protecting its customers.
LendingTree takes no personal responsibility for what happens with a customer’s personal information after it sells that information to a financial institution.
Common Complaints and Praises
Many customers are perfectly happy using LendingTree; it provides the convenience of comparing several financing options, and the majority of its transactions complete without issue.
Customers score LendingTree at an average of about 3.8/5 on ConsumerAffairs. People satisfied with LendingTree cite the website’s ease of use, convenience, and finance options as the top reasons for their positive experience.
Customer complaints tend to focus on one of the following issues:
- Inordinate amounts of calls from multiple institutions, beginning after signing up and continuing after deactivating a LendingTree account
- Dissemination of the customer’s personal information
These complaints stem from LendingTree’s business model, as described above. Because LendingTree makes money by selling customer information to lending institutions, institutions will contact the customer directly and may continue to do so after the customer stops using LendingTree.
Because LendingTree takes no responsibility for personal information after selling it, it is possible that unless the customer follows up with each lender, the customer’s information could be used in a manner that they didn’t originally intend.
If you’re receiving a high number of calls or inquiries, see our article on how to stop LendingTree from running your credit.
You may also want to block the numbers that call you and opt out of prescreened offers since LendingTree won’t be the only company that has your information.