Completely Free Credit Score
Feel your financial situation is getting out of control? Credit Karma claims it can help you reign it in. The personal financial management company, founded in 2008, now has more than 15 million users. I recently became one of them.

When I joined Credit Karma, I had a modest understanding of things financial. I knew what a credit score is and had a general idea of why it’s important. But, I didn’t know much about why it fluctuates and how, specifically, I could help raise it. After a few illuminating days of using the Credit Karma site, I feel better informed and in greater control of my financial health. Here’s why:

Overview of what Credit Karma does.

Credit Karma gives you continuing access to your credit report and, most importantly, your credit scores  from a national credit bureau. It also provides online financial management tools and advice on how to improve your credit score and your personal finances. And, all of it is for free.

Background on what a credit score is, and why it matters.

credit karma credit scoreYour credit score is an evaluation of your creditworthiness based on your credit history and a complex mathematical calculation that takes into account such factors as how much money you owe and whether you pay on time. In the U.S., the vast majority of lenders use the score generated under the FICO (Fair Isaac Corporation) scoring system,  which assigns scores ranging from 300-850. (The higher, the better.)

For a fee, you can receive your official FICO score directly from FICO. Additionally, you can get a score similar to FICO from one of the three national U.S. credit bureaus: Equifax, Experian, and TransUnion.  (The bureaus’ scores are all FICO-similar, but each uses its own unique scoring system, so you could end up with somewhat different scores from each bureau.)  Credit Karma provides free credit scores from TransUnion.

Impact of scores. Lenders use your primary FICO or  FICO-similar score to determine whether you’ll be approved for a loan or credit line, the amount, and the interest rate you will be charged.  Surprisingly, car and home insurance companies also use your credit scores to set your insurance rates, since studies have shown a correlation between credit scores and the likelihood of filing insurance claims. The credit bureaus have come up with somewhat different types of credit scores for those insurers.

Credit Karma gives you free access to four different types of TransUnion credit scores:  a) your primary, “First Account” credit score (based generally on FICO) that is used by most lenders, b) your auto insurance score, c) your home insurance score, and d) your VantageScore, a separate credit scoring model created through collaboration among the three credit bureaus in order to make scoring more consistent between them. Credit Karma reports that this newer VantageScore is used by four of the top five financial institutions, five of the top five credit card issuers, and two of the top five auto lenders. It’s important to note that the types of “soft inquiries” that Credit Karma makes in order to get your scores do not count against your credit score.

A credit score is different from a credit report. Your credit report is a compilation of your credit history, created from information that each of your lenders sends to the credit bureaus. The report provides the raw data used by the bureaus to come up with your credit score. Under federal law, you are entitled to a free copy of your credit report from each of the three credit bureaus once every 12 months, so that you can check for any inaccuracies. However, the law does not require the bureaus to release their credit scores for free — those can be obtained from the bureaus for a fee. For example, Experian sells its credit score and report for $14.95.

The credit report and score from Credit Karma are – really — free. 

Many companies that claim to give you a “free” credit score require you to first enroll in their credit monitoring program for a monthly fee. That is not the case with Credit Karma. You don’t have to sign up for anything else in order to get your free scores and report. The services they offer are without charge; you don’t even enter your credit card number.

So, what’s in it for Credit Karma? It advertises goods and services from its partner companies, often by matching your financial profile with the type of services its partners offer. For example, if you have a credit score in the “good” range, it might advertise loan programs specifically geared toward people with “good” credit.

The partner ads appear throughout the Credit Karma site. Additionally, Credit Karma uses email to disseminate partner ads, but it offers an opt-out;  I selected opt-out and it seems to work. Credit Karma also sends emails about the features on its site,  but there is an opt-out for those emails, too.

Completely Free Credit Score

Although Credit Karma helps its advertising partners tailor their goods and services to you by sharing general information on your financial profile, the company maintains that it does not give them your actual credit score.

The type of credit score Credit Karma provides does have value.

Some companies offer free credit scores that have little usefulness because they are not based on the FICO system. Such non-FICO based, specialty credit scores are not generally utilized by lenders, and therefore are of limited value in assessing your credit position. However, the primary TransUnion credit score that Credit Karma provides is formulated very much like a true FICO score. According to a 2013 Reuters news article  that appears on Credit Karma’s website, a test comparing a consumer’s credit scores from several different sources — including Credit Karma – revealed that while the scores varied somewhat, they were all in a similar range, suggesting that those free FICO-based scores are useful to consumers.

It is relatively quick and easy to sign up for Credit Karma. Its short online application asks mainly for name-and-address information, plus your social security number (SSN). (Initially, it sought just the last four digits,  but  after input it advised that my complete SSN was needed.)  Since the application page was clearly security encrypted and Credit Karma states that it does not keep your SSN on file, I took a leap of faith and complied. Additionally, the site has another security feature requiring you to answer a few multiple choice questions about your personal finances, obviously based on information in your credit report.  I found the questions easy to answer. All told, it probably took me 2 minutes to complete sign-up.

Credit score and report comes instantaneously. Within seconds after my sign-up was complete, a page popped up giving my credit score, an analysis of it, and information from my credit report.

Other free financial management tools: In addition to my report and score, I gained access to a slew of interesting financial tools designed to help me monitor and raise my credit score, and to strengthen my personal financial condition.

  • Link and monitor accounts. Credit Karma allows you to link all your credit accounts through its site, and then it automatically monitors them for transactions made, balances due, and payment due dates. Having your accounts linked lets you check all of your financial obligations in one place, instead of having to log onto each account separately. Credit Karma will also send email reminders whenever your individual bills are due. It also allows you to compare your linked accounts appearing online with the accounts that are listed in your TransUnion credit report to determine whether there are any discrepancies. This comparison brought to my attention a department store account that I had not realized was still open.

The process of creating the links is simple. All you need is your username and password for each account. Once I collected my passwords, it took about one minute to link each account.

  • Credit score simulator. This tool is a real eye-opener. It shows how taking various actions – such as letting a monthly bill become overdue or applying for an additional credit card — could impact your overall credit score. I tried the simulator, and was surprised to learn that if I let just one monthly account go 30 days past due, my primary score could be lowered by 45 points, which would move me from the “excellent” category down to “good.”  On the other hand, if I paid off all my credit card balances (New Year’s resolution, anyone?), my score could go up 9 points. This type of information is very helpful in figuring out the most effective way to improve your score.
    credit karma credit score simulator
  • Best of”  lists of financial products. Credit Karma includes “best of”  listings categorized by the factors you select as well as by your credit score range. Examples: the best credit cards for rewards or interest rates, the best loans for people with your credit profile.
  • Member reviews of services and providers. The site includes thousands of Credit Karma member reviews on financial services and providers. I did a quick look to be sure they weren’t all suspiciously positive, and there does seem to be a balance. Some reviews are comprehensive and there are forum-style exchanges among members about specific issues.
  • Original articles and a blog on credit and financial concepts. Among them is an article on “What is a Derogatory Mark (On Your Credit Report)” and a quiz to determine whether your partner is a “financial bully.” 
  • Financial Calculators. The site includes programs to calculate home affordability, simple loans, debt repayment, and amortization.

Is it secure?  Is anything today? I did a few basic tests, including whether the site would lock me out after a period of inactivity or several incorrect log-ins, and whether it would email me about these issues. It did all that.

Free mobile apps. Credit Karma offers free mobile apps for iPhone and Android. (I did not try them.)

The bottom line?

Credit Karma is a helpful tool for analyzing and planning your personal credit and finances.  The account linking features save time, and the articles are a good resource for coming up-to-speed on basic and complex financial  issues.  And, the TransUnion scores and analyses provided by Credit Karma are great for learning about  your credit standing and how to improve it. Just keep in mind that the FICO-similar  score from Credit Karma is not your official FICO score, which you may need if you are using your score to negotiate for a mortgage or other important financial transaction. 


Completely Free Credit Score