Having a good credit score is very important if you are applying for a loan, credit card or buying a home. Having a good credit score and credit history can determine the approval or denial of your application.
However, understanding your credit report can be quite mind-boggling, which is where apps such as Credit Karma come in. Credit Karma is a personal finance app that can help you understand your credit report and make your financial life significantly easier for you.
How Credit Karma Works
Started in 2007, Credit Karma is a free online website and mobile app service that shows you your monthly credit report and credit score. Credit Karma also analyzes your credit score and report and shows you the reasons why your credit score is good or bad. Credit Karma also provides other services such as credit card and loan recommendations, credit monitoring and state and federal income tax.
You can also access your TransUnion credit report via Credit Karma in addition to your Equifax and TransUnion credit scores. While you can get your credit reports free of cost from other websites, you are restricted by the fact that you can view these reports just once in a year; however, with Credit Karma, you can get your credit report from TransUnion and also get updates on a weekly basis.
How to Get Started
The best part about Credit Karma is that the service is free and you don’t have to enter your credit card details, so you need not really worry about being charged a fee or the need to cancel your free trial. However, for the service to work, you need to provide information about yourself and a few other details such as:
- Your email address.
- You need to agree to receive email updates regarding your credit report and other notifications related to your credit profile.
- You also need to agree to allow Credit Karma access your credit reports from Equifax and TransUnion.
- You must provide your personal details such as your phone number, address, date of birth, social security number (last 4 digits) and your annual income.
- You need to verify your identity by answering a few multiple choice questions.
How Does Credit Karma Make Money?
Credit Karma makes money mainly via credit card and loan recommendations. It recommends credit cards and loans for you according to your credit score and when you apply for your credit card or loan via Credit Karma, they get a commission. However, to use the services of Credit Karma, you don’t have to apply for a credit card. You can simply sign up to access their services of credit monitoring and credit score analysis too.
The company also makes money by means of targeted advertising, which is on basis of your financial habits. For instance, if your credit score is very good, banks would like to target you for their credit cards and loans and the credit card and loan companies would not really mind paying for it, as it is cheaper for the banks to target people with excellent credit scores who qualify for their products instead of advertising to a several hundreds of people who may not qualify the loans or credit cards. However, the drawback of this is that Credit Karma makes use of your personal information in order to target you for advertisements.
Credit Karma’s Services
The main plus of Credit Karma is that you can see your credit score free of cost. In fact, Credit Karma is among the first online services to offer this service free of cost, which is the main reason for the popularity of the platform.
Credit Karma gives you the VantageScore 3.0, developed by Experian, TransUnion and Equifax, the 3 credit bureaus, which is an alternative to the FICO score. And, your credit score will be updated from TransUnion and Equifax every time you log into your Credit Karma account.
Along with your free credit score, Credit Karma also monitors your credit. As Credit Karma already has access to your credit report in order to give you your credit scores, if there is any unusual activity, Credit Karma will alert you immediately.
For instance, if you are applying for a car loan, mortgage loan or a credit card, you will get a notification about it from Credit Karma when the credit bureaus make a report of the inquiry. And, you will get another notification if your loan or credit card application is approved alerting you to the opening of a new credit account.
This makes it extremely easy to spot any potential id fraud. Today, with so many instances of data breaches, getting credit monitoring reports from at least 2 credit bureaus is a good idea.
Credit Karma has introduced free state and federal income tax preparation and filing quite recently. And, despite the complexity of your tax filing, whether you require itemization or if you have Schedule C, D or E forms in case of income from self-employment or investments, Credit Karma will do it for you free of cost. However, Credit Karma does not file tax forms that are unsupported such as returns of part-year residents or the state tax returns of Mexico.
While Credit Karma may not be as user-friendly as some other paid services which also provide automatic data imports or expert tax advice, nevertheless, they can do the job efficiently and the best part is that the services are free and using Credit Karma is also so much quicker than doing your tax filing process manually by yourself.
Credit Card and Loans Recommendations
Millions of people make use of Credit Karma for their credit score and credit monitoring for free. However, Credit Karma needs to make money to offer the free services, which they do via the loan and credit card applications.
Based on your credit scores, Credit Karma offers a list of credit card and loan recommendations and Credit Karma makes money on each application. Credit Karma offers credit cards that can be classified into various categories such as low interest, balance transfer, airlines, cashback, rewards, business and student cards.
Credit Karma offers recommendations for personal, home, auto, business and student loans. To get a quote, you must provide personal information such as your age, employment information and income.
Applying for a loan through Credit Karma is easier and more convenient than applying one at your local bank and it is also a great way by which you can compare the interest rates.
Pros and Cons of Using Credit Karma
- You can get your free TransUnion and Equifax credit scores for life. The scores are updated continually and you can see how your credit score changes when you take actions that impact your credit scores.
- Access to your free TransUnion and Equifax credit report. You can access your credit reports that are updated weekly on your dashboard and check them whenever you want. This allows you to monitor your credit report on a frequent basis and correct any discrepancies or errors.
- The free credit monitoring feature is beneficial and allows you to monitor any suspicious activity such as credit inquiries, the creation of new accounts, etc. not initiated by you.
- By linking your accounts, you can track your credit card spends.
- The Credit Factors report lets you view the grade on the various details which make up your credit report such as payment history, the rate of credit utilization, the age of accounts, credit inquiries, total accounts and negative remarks.
- The Credit Score Simulator allows you to simulate how your credit score will be impacted when you take certain actions such as opening/closing a credit card or increasing your credit line, among other things. This is probably the most useful feature of Credit Karma.
- Credit Karma Tax helps you to prepare and file your tax, free of cost.
- There are various financial calculators offered by Credit Karma that you can use such as loan, mortgage refinance, amortization, debt repayment, etc.
- With Credit Karma, you receive a Vantage Score and not a FICO score, which is still the score used by many lenders and is considered the “gold standard” amongst credit scores.
- You cannot access your actual credit report via Credit Karma.
- When you log in to your Credit Karma account, there are several ads and offers that you encounter in the interface. However, this is the way in which Credit Karma makes its revenue for the otherwise free service it offers. Also, there is no obligation that you must sign up for any of the offers.
Overall, Credit Karma is an excellent service that every person should have in their financial repertoire. Today, Credit Karma boasts of a customer base of more than 60 million members because of the excellent credit score and credit monitoring it provides.
The biggest plus of Credit Karma is that it offers free services, which is usually charged around $15 or more by other service providers including TransUnion, Experian and Equifax. The ease of use, the user-friendly graphic interfaces, Simulator tool and the report card make Credit Karma an excellent financial platform to use.