Credit Karma Review
Ever since I first brought up Credit Karma in my 10 free financial services post (yes, you can get a free Credit Karma account), I’ve had a ton of curious friends and readers ask me questions. That prompted me to write this Credit Karma review. I’ve now been a Credit Karma user for over 4 years, and update this review every few months to reflect my experience. The most common questions I receive about Credit Karma are:
– Is Credit Karma free?
– How does Credit Karma make money?
– Is Credit Karma safe?
– Is Credit Karma a scam?
– What are the benefits of using Credit Karma?
– How accurate is Credit Karma?
I had all of those questions myself. And I did some research. So what follows is a review that hopefully answers these questions about the service, benefits, and whether or not I’d recommend creating an account.
Is Credit Karma Free?
Is Credit Karma really 100% free? Yes it is. This was a big question that I had going in. You’ll notice with most “free credit score” companies, when you sign up for their service, they ask for your credit card. And then, a month later, you’ll unsuspectingly get charged. After going back to read the fine print, you’ll notice that free was really only free for the first month, and if you didn’t cancel your subscription, you’ll get a monthly charge. That’s why they asked for your credit card.
Not at Credit Karma. In their FAQ’s they state:
Q: Is Credit Karma really free?
A: Credit Karma is always 100% free.
Q: Does Credit Karma require a credit card to sign up?
A: No, and we never will. Credit Karma will never ask you for your credit card number during the registration process or at any other time.
I can confirm. There’s really no way to get screwed on unsuspecting charges with them.
How Does Credit Karma Make Money?
You’re probably wondering how Credit Karma makes money if they don’t charge you for their service. It’s a legit question to ask. From everything I’ve seen, they have almost an identical business model to Mint.com. If you’ve signed up for Mint’s service, you’ll periodically get Mint partner offers that could potentially save you money. It’s a form of advertising. Credit Karma has the exact same model: ad-based offers from partners.
You can elect whether or not you actually want to receive these offers right on the sign-up page under communication preferences (and you are even opted out by default). I appreciate the transparency and that I didn’t have to find some secret unsubscribe link hidden deep in the site somewhere.
Is Credit Karma Safe?
Any time you are dealing with your credit, you want to make sure your privacy is safe and secure. Is Credit Karma safe and secure? Without a doubt – Credit Karma is extremely safe.
With any credit service, you must be identified via your Social Security number. It is first worth noting that you do not provide your actual full Social Security number to Credit Karma when you create an account – only the last 4 digits (see image). And this is only for first time retrieval – it is not stored on their servers. That is less than my doctor’s office asks of me – and they aren’t offering me credit services.
To keep your privacy safe, Credit Karma also boasts the following privacy, safety, and security measures:
- Credit Karma uses 128-bit encryption to secure the transmission of information to our site (note the “https” in the address bar).
- We won’t sell or rent your personal information to third parties for any purpose and will never share your credit report or credit score with third parties.
- Accounts are read only – you can’t execute any transactions.
I wish my health insurer – Anthem – had the same security measures.
Is Credit Karma a Scam?
I was wondering whether Credit Karma was a scam. After researching and using them myself, I can tell you Credit Karma is definitely not a scam. I did a lot of research before signing up. They are a legit company with a legit business model that has been around for years now.
Credit Karma is a TRUSTe certified company. They are also a BBB (Better Business Bureau) Accredited company and have a strong history of responses and complaint resolutions to customers. That is reassuring.
Power in numbers is reassuring as well. Credit Karma surpassed 50 million members in January of 2016.
Also, they recently received additional funding of $175 million from investors – which brings their total funding up to $368.5 million. They are well funded now and into the future to keep offering excellent services at no cost to users.
What are the Benefits of Using Credit Karma?
Here’s a rundown of all the free you get from your Credit Karma account:
- TransUnion Credit Score: It is continuously updated so you can see how it changes as you make a change that will impact your credit score. And it charts out over time, as seen in my screen shot above. You can also see how that score compares nationally, and you get an overall grade.
- Equifax Credit Score: In January of 2015, Credit Karma started offering Equifax credit scores, in addition to TransUnion credit scores. That makes free scores for 2 out of the 3 major credit bureaus.
- TransUnion Credit Report: Credit Karma has free credit report access too! Access is to your complete TransUnion credit report and you can check it any time (it updates weekly). This gives you more consistent access to credit reporting throughout the year (versus just once via annualcreditreport.com), allowing you to frequently monitor your credit report and correct any errors or discrepancies.
- Equifax Credit Report: TransUnion credit reports were added in late 2014, and shortly afterward (January, 2015), free Equifax credit reports were added as well.
- Free Credit Monitoring: Credit Karma has now even started offering free credit monitoring in addition to their other free services.
- TransUnion Auto Insurance Score: Many insurers are now factoring in an auto insurance score, which is based on your credit history. This lets you know how you stack up against others.
- TransUnion Home Insurance Score: similar to your auto insurance score, but used for home insurance.
- Your VantageScore: This is a cumulative, consistent score across all three credit bureaus.
- Credit Report Card: This is definitely a nice feature. You get to see a grade on each of the factors that go into making up your credit report: credit utilization rate, payment history, age of accounts, derogatory remarks, total accounts, and credit inquiries. Good stuff to know if you are looking to improve your credit score.
- Credit Score Simulator: This is probably the most useful feature on Credit Karma. You get to simulate how taking certain actions (i.e. closing a credit card, opening a new one, increasing your credit line, etc.) would likely impact your score. I was surprised to see how little of an impact opening or closing a credit card account would have. Definitely good to know.
How Accurate is Credit Karma?
A lot of people want to know if the scores you receive from Credit Karma are accurate. By “accurate”, I’m assuming they want to compare the Credit Karma credit scores to a FICO score (which is commonly used by lenders to judge your credit). I crosschecked. Your experience may vary, the but scores that I have received from TransUnion and Equifax through Credit Karma are usually with 1-2 points of my FICO score. That’s less than a 1% differential – which is basically no difference when you are judged for a credit approval. The credit rating companies have gone out of their way to have similar rating models, and FICO uses TransUnion, Equifax, and Experian data to arrive at their scores.
Final Thoughts on Credit Karma
The only Credit Karma complaint I have is that there are a lot of offers in the interface when you log in to your account. It’s a minor annoyance, but this is how Credit Karma makes money, so I’ll take that trade-off vs. having to pay for the service.
All-in-all, it is a super useful service that I feel really good about. You’re basically getting for free what many other services like Equifax, TransUnion, and Experian are charging $15 or more per month for. And having used TransUnion’s credit score reporting service in the past, the nice graphical interfaces, report card, and Simulator tool make Credit Karma much more useful. I highly recommended their service to anyone. Please share your Credit Karma reviews.