Is LendingTree Legit? Safe? Here’s What to Know

LendingTree’s stated purpose is to act as a market in which various lending institutions compete with each other for customers. But is LendingTree legit? Is LendingTree safe? How does LendingTree work? Does LendingTree run your credit? We have the answers to all these questions and more.

In This Article

Is LendingTree Legit?

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

LendingTree 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. He officially launched LendingTree in 1998. In 2003, the company was bought by IAC (which 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 resources, such as financial calculators and mortgage coaching. LendingTree also encourages its customers to create an online account for access to features like credit score checks and personal loan quotes. On top of that, LendingTree does this all at no charge to people seeking financing. So far, so good.

How Does It Work?

To use LendingTree’s services, a customer provides the company with personal information that 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

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 from there on their own.

Seems legit, right? But, if you take a closer look at how LendingTree generates revenue, things get a little shady. 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.”

This 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 you look at how LendingTree describes how it makes money in its 2014 annual report to its shareholders, it looks 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.

This paints quite a different picture. 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.  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 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.

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 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 Complaints & 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.

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. If you’re receiving a high number of calls, you can contact LendingTree and ask it to add you to its “Do Not Call” list. 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. 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, it runs a “soft” check, only after you give consent. However, when LendingTree sells customer information to financial institutions, those institutions may run a “hard” credit checks to determine eligibility for a loan or other service. Hard credit checks can lower your credit score anywhere from three to 10 points. LendingTree asserts 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. However, a customer must accept one of the offers before the time period expires or their credit score will be affected.

Related Article: No Credit Check Signature Loans to Choose From

In Summary

How does LendingTree work? Is LendingTree legit? Is LendingTree safe? So, it appears that LendingTree is both legit and safe. 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.

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8 comments

  • How can I stop LendingTree from sending out notices to lenders with all of my info? I am getting unwanted calls and emails every day!

  • Out of no where, today, I started receiving texts, calls and emails for loan offers. The reps stated that they received my info. from Lending Tree, but I never went on their web site to apply for anything. I called Lending Tree which stated that my info. was in their system with the wrong social security number, however. They wouldn’t tell me who or when the info. was submitted to them… they stated I needed to go to my local police and get a subpoena for Lending Tree to release that info. My thinking is that it may be part of a scam where someone is entering personal data and making up social security numbers just to enter it in their system so they can sell the info. on to its members. Your thoughts?

    • Laura Bachmann says:
      First Quarter Finance logostaff

      Hi Tom,

      We haven’t heard any reports of LendingTree themselves entering false information into their system just to sell more info, and it seems that if they did this regularly, the lenders they sell info to would notice and stop buying. That said, someone could have easily entered in your information. Good thing they didn’t get your SSN right!

  • Nona Adkins says:

    I have received an email, text message & phone call from a representative that claimed to be from Lending Tree offering me an approved loan up to 10,000. They already had my personal information from a prior online loan application. My concern is that they are requesting that I pay for a loan insurance policy in the amount of $250. & they’re requesting my username & password to my mobile online banking account. Is this a legitimate business policy & procedure? The number that was texted & called me is: (704) 374-5982.

    • Rebecca Turley says:
      First Quarter Finance logostaff

      Hi Nona,

      This is most certainly a scam! No one should EVER ask you for your mobile banking login information! Good for you for being suspicious!

  • Thanks for this article! This was incredibly informative, and being a LendingTree user, I suppose learning more about this type of business was better experienced late than never. I wish I hadn’t taken out that loan in complete desperation in the middle of the night when I was freaking out. It sucks that it’s so EASY and they make their convenience so alluring.