Credit Karma Review: Free VantageScores From TransUnion & Equifax
In the age of precarious living, we’re all swimming upstream. Dealing with the ever-escalating expenses of life — housing, education, health care, etc. — can put a serious strain on your credit. Because our credit score so heavily influences what we are able to do with our lives, interest in free credit score services has never been higher.
One of the most prominent websites offering free credit scores and reports is Credit Karma. While over 85 million people are already Credit Karma members (as of January 2019), others may (justifiably) be concerned about the privacy of their data, the accuracy of the credit scores given, and whether or not Credit Karma is genuinely free to use.
Let’s tackle these questions and find out whether or not Credit Karma is a good choice when it comes to keeping an eye on your credit score. I’ll assume the role of the Karma Police!
Sorry — for a minute there, I lost myself. (Do people still get Radiohead references in 2019?)
Note: While Credit Karma also offers tax services, this review will be focused on Credit Karma’s credit management services.
Table of Contents
What Is Credit Karma?
Credit Karma was founded on March 8th, 2007 by Kenneth Lin, Ryan Graciano, and Nichole Mustard. While the platform was founded in order to provide users with free information about their credit, the company has steadily expanded its offerings over the years, offering full credit reports, personalized offers for credit cards and personal loans, and a tax planning service. The company now employs over 800 people.
Is Credit Karma Really Free?
The short answer: Yes. The credit scores and reports given by Credit Karma are completely free. All you need is a free Credit Karma account. This begs the question: How does Credit Karma make money?
Credit Karma uses your personal credit data to send you targeted ads based on your individual financial situation. If you ultimately take an offer from one of Credit Karma’s advertising partners, the company makes money off the sale. This way, Credit Karma doesn’t have to charge users a fee to use the company’s services.
Is Credit Karma Safe?
Naturally, when people hear that a company is using customers’ financial information to send them targeted ads, they may be concerned with what else Credit Karma could be doing with that information. Additionally, Credit Karma requires you to give your social security number in order to verify your identity when pulling your credit. Having to enter my SSN online, for any reason, makes me feel a bit uneasy, and it probably does for you as well.
Despite all this, Credit Karma is as safe as a site like this can be and has a strong track record in this regard. The site uses 128-bit encryption to protect the information you type in, and your social security number is not stored with Credit Karma. Additionally, the site has a DigiCert EV SSL certificate (the highest degree of authentication). And while Credit Karma uses your financial information to match you with ads, the company has a policy of not sharing that information with third parties. I’ve yet to see any evidence that the company has breached this policy.
Credit Scores & Reports Offered By Credit Karma
Credit Karma provides free credit scores from TransUnion and Equifax, two of the three major credit bureaus (the third is Experian). These scores are calculated using the VantageScore formula and are updated on a weekly basis. Note that your VantageScore credit score is different than your FICO score, as FICO is an entirely different (and older) credit-scoring model.
Learn all about the differences between VantageScore and FICO in our complete guide, but suffice to say, the two models weigh various aspects of your credit data differently than one another, therefore your VantageScore credit scores may differ from your FICO scores. If your creditor is looking at your FICO score, it won’t be the same TransUnion or Equifax score you get from Credit Karma. However, VantageScore — the newer scoring model — has been gaining acceptance with time.
In addition to your TransUnion and Equifax credit scores, you’ll also have access to your full TransUnion and Equifax credit reports. Credit Karma will highlight the most important items in the reports for you to help you make sense of what your reports mean, as they can be hard to decipher in their raw form. These reports are updated each week and you can check them as often as you like with no penalty.
Other Services Offered By Credit Karma
Free credit scores and reports aren’t the only services offered by Credit Karma. Let’s go through the company’s other offerings.
Credit Karma provides free credit monitoring along with free credit scores and reports. According to Credit Karma, “If we notice important changes on your TransUnion or Equifax credit reports, we’ll send you an alert so you can check for suspicious activity.”
A related service provided by Credit Karma is Direct Dispute. If you notice an error on your TransUnion credit report, you can submit a dispute without leaving Credit Karma. Unfortunately, this does not apply to errors on your Equifax credit report — for those, you’ll have to submit a dispute directly to Equifax.
As you can see, Credit Karma gives you some free tools to help you manage your finances. Let’s go through them.
- Credit Score Simulator: This handy tool lets you calculate how actions you might take can affect your credit score. For example, you can see what effect opening a new credit card account or closing an existing account would have on your credit score. It’s certainly better than taking a financial action without knowing how it will impact your score and hoping for the best!
- Debt Repayment Calculator: With this tool, you can see how long it will take to pay off your credit card debt. First, you enter your balance owed and your interest rate. You then either a) enter your expected monthly payment and have the calculator tell you when your debt will be repaid given the information you put in, or b) enter the time frame by which you want to have your balance paid off and have the calculator give you the amount you’ll have to pay per month in order to pay off your debt in your desired time frame.
- Simple Loan Calculator: This tool determines your estimated payments for different loan amounts, interest rates, and terms. Just enter the loan amount, interest rate, and term length (in years) and the calculator will estimate your monthly payments.
- Amortization Calculator: This tool shows how your debt will go down over time with your payments. It shows your payment breakdown of interest paid, principal paid, and loan balance over the life of the loan. Essentially, this is a tool that shows you how much of your payments will go towards paying down interest and how much will go towards paying down the actual principal, and it will show you how this balance changes over time.
Home & Auto Insurance Scores
Credit Karma will estimate your home insurance score and your auto insurance score for you by taking into account your active accounts, payment history, credit card utilization, and age of credit history. These scores exist to estimate the likelihood that you will file a claim. Many states use these scores to determine your monthly premiums, though this practice is banned in other states.
Offers For Credit Cards, Personal Loans, And Automobile Loans
Credit Karma uses your personal financial data to send you offers for the credit cards, personal loans, and automobile loans you are most likely to qualify for based on your credit profile. When you choose one of these options, you can see reviews of the credit card or loan by Credit Karma members who have experience with using the card or lender in question.
Search For Unclaimed Money
Credit Karma recently introduced this new feature. It identifies any unclaimed money that may be owed to you by your state. This money may have originally been owed to you by a business, but when a business can’t figure out how to send you the money it owes you, it may turn the money over to the state.
This feature lets you search by state to show you if the state in question owes you any money. If it does, you’ll be directed to state-specific resources that can help you claim what you are owed.
Along with Credit Karma’s other services, the company also offers Credit Karma Tax, offering free filing for federal and state tax returns.
For better or worse, your credit score is vitally important in determining the opportunities you’ll be able to access throughout your life. Credit Karma’s services help you understand what goes into determining your credit score, identify what you can do to improve it, monitor your credit, and more — all without charging you a penny. It’s not a scam. It’s free information — information that would be extremely difficult and time-consuming (and in some cases downright impossible) to gather by yourself. Information is one of the few means by which you can empower yourself to make good financial decisions, so it’s hard to find fault with Credit Karma making money by selling financial products on its website, as the alternative would be to charge users a subscription fee.
Should you use Credit Karma’s credit score services?
This service might be a good option if…
- You want to know your credit score without paying a fee
- You want free credit monitoring
- You want to get offers for financial products that you would be likely to qualify for
- You want to simulate how various actions you might take (opening a new credit card account etc.) would impact your credit score
You might want to use a different service if…
- You specifically want to know your FICO score
- You want to see your credit report from Experian, not just from TransUnion and Equifax