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Credit Karma Review
10 Jun 2018

Credit Karma Review: Is it a Good Free Credit Checker?

When a flight attendant walks down the plane aisle advertising all the potential rewards you could earn using their credit card, does your mouth water?

It’s a nice picture – the ability to plan a vacation that is paid for completely by purchases you are already making.

But in order to secure a card with rewards like that, or to get a host of other credits such as personal loans, you have to know your credit score. It’s the biggest factor at play for the approval or denial of your application.

Many people have no idea what their credit score is. Fortunately, there are a lot of websites out there that promise to make finding out and improving your credit score easy.

One of the biggest ones out there is Credit Karma with sixty million members.

You have probably seen their commercials all over the television.

But is their promise too good to be true?

Let’s find out! Read on for our complete Credit Karma review to find out everything you need to consider before using this service.

An Introduction to Credit Karma

Credit Karma started in 2007 as a free service offered online in the United States. It provides users with a monthly credit score report that they can use to make adjustments and improve their credit over time.

In addition to that, they also offered credit monitoring, federal and state tax preparation, and recommendations for the best credit cards and loans tailored to your personal preferences.

While Credit Karma’s tax preparation services are not as in-depth as some other software like Turbotax, if you are familiar with the tax filing process then you will find their system easy to use.

While these services are nice offerings to have for customers, the majority of users on the website sign up just to access their credit scores. People do this when they are going to apply for a large purchase or if they are going to have their credit run for any other reason.

All those services sound great, but you may be wondering how the website makes money if it is giving away so much for free. You’re right to be wary. Credit Karma asks for you to input a lot of sensitive personal information and identity theft is a very real threat.

If you understand Credit Karma’s business model, then its easy to see where they get their profit.

Credit Karma makes most of its revenue from pairing people with credit cards from companies that generally accept people in their credit bracket. Then, if someone signs up, they get a commission from the credit card company for referring them.

Understanding Credit Karma Scores

There are multiple methods for scoring credit that are lenders use to assess risk. The most popular method has to be the FICO credit score. This score is standard.

But every lender can make their own set of criteria for accepting applicants meaning that, theoretically, you have hundreds of credit scores. Different lenders may think that different factors are more important when assessing creditworthiness. There really isn’t just one number to be found.

In fact, the score model used by many major credit bureaus is the VantageScore 3.0. This generic scoring model came out in 2006 and was developed by TransUnion, Equifax and Experian.

While each of these companies uses the same factors for their evaluation, the reason Credit Karma displays three scores is that each of these credit bureaus has access to slightly different information. That accounts for the variation in the scores.

The reason that this model was developed was to provide more accurate assessments of creditworthiness and more consistent scores than were previously available.

How is My VantageScore Superior?

VantageScore 3.0 is theoretically the most predictive model creditors can use to determine creditworthiness. It can score millions of people since it has access to a broad set of data and the criteria it uses for scoring is very accurate at predicting whether or not someone might become delinquent.

VantageScore reviews information that is up to 24 months old for most people and reaches back further for people who have smaller credit reports. This means that the software has a lot of information to work with when making the assessment. can calculate the likelihood that someone will pay back a creditor.

The VantageScore ranges from 300-850, a change from its initial score range from 501-990. The move was meant to align the scale with the expectations of consumers who were used to the FICO credit scale range. That way its easier to compare.

What Factors are Considered?

The VantageScore is similar to a FICO score in its considerations. It looks at things like how good you were at paying your bills in the past to decide whether you will be likely to pay your bills in the future.

But, it also breaks new ground and covers a wider variety of factors than the traditional FICO score.

The following factors are weighted for differently for every individual based on their credit situation.

Payment History

This is considered the number one predictor of risk of delinquency. A late payment will stay on your credit report for seven years.

Age and Type of Credit

To have a high credit score, you should have a good mix of accounts and a lengthy credit history.

The best move is to have a variety of different accounts that you pay on regularly.

Credit Utilization

Credit utilization is calculated by dividing the balance on your cards with the available credit. To have a great credit score, you should try to keep this under thirty percent.

Total Balance

The total balance of your current and previous debts is considered as well. Reducing your debt helps to improve your credit score.

Recent Behavior

This factor relates to how many new credit accounts you have opened recently. It also considers the number of hard inquiries that have been placed on your file. This is the least important factor that affects your credit.

Pros and Cons of Using Credit Karma

The biggest complaint made against Credit Karma is that they don’t provide FICO credit scores and that is some people’s expectation when they come to the website.

But since it’s largely using a lot of the same information as FICO to calculate your score, it can be relatively accurate.

Where Credit Karma can really come in handy is with their credit alert system. This would let you know if your score started to tank so that you could fix whatever is wrong before it’s completely ruined.

You can also program notifications for if a hard inquiry is done on your account or if a new credit account has been opened in your name so that no activity can take place without your knowledge. This is a great thing in the age of the internet because it can help protect you from identity theft and traditional theft.

Many people also like to take advantage of Credit Karma’s free tax preparation every year. It will file nearly any return for free (Sorry, not you New Mexico).

A final advantage of Credit Karma is that you can see user reviews of various credit cards. This allows you to get lots of information about how easy rewards were to earn and redeem as well as what their experience with customer service was like.

Since you have reviews from impartial people just like yourself, you can be sure that the information you get is backed up.

The Verdict of This Credit Karma Review

VantageScore credit scores were used by twenty of the top twenty-five biggest financial institutions in the United States between July of 2015 and June of 2016.

That means that paying attention to your VantageScore is important if you want to be considered for loans and credit cards with the most competitive rates.

With Credit Karma, you’re able to access your TransUnion and Equifax reports on a weekly basis so that you can track changes over time.

The reason that Credit Karma has been so successful is that the resources they offer that make it easy to monitor your credit and plan for successful future loan and credit card applications.

After Seeing Your Score

Now that you are comfortable with the idea after reading this Credit Karma review, you’re ready to check out your score.

But even if your score isn’t as high as you hoped, you may still have options for lending. Check out our list of the best credit cards for people with bad credit.