The Good and Bad of Credit Karma in 2022
Over the years there’s been no shortage of television commercials reminding us to check our credit scores. While many will likely remember the incessant FreeCreditReport.com songs that populated the airwaves earlier in the decade, recent years have brought a shift toward another credit monitoring platform: Credit Karma. The biggest factor driving the site’s popularity is the fact that, unlike some past services, Credit Karma is free — like don’t-even-enter-a-credit-card-number free. As a result the site was my first stop when I was finally ready to face my credit head-on.
Some years and a handful of changes later, Credit Karma remains the most popular educational credit score site available. Spoiler alert: that’s with good reason — although the service isn’t perfect. Let’s take a closer look at what you need to know about Credit Karma, including the pros and cons.
Signing Up For and Navigating Credit Karma
Before you can view your credit scores and reports, Credit Karma requires you to sign up for an account. As I mentioned the site is completely free and doesn’t require you to enter a credit card number, making for a relatively painless process. However you will need to share some sensitive information including your social security number, so double-check that your browser shows the site as “https://” — the ‘s’ meaning it’s secure — and it’s probably best to not sign up while using public WiFi.
After entering the basic info you’ll have to confirm your identity by answering some oddly entertaining questions they devise regarding where you’ve lived, what types of credit you’ve held, and sometimes even your old roommate’s birthday (seriously). Should you pass their challenge you may cross the Bridge of Death in safety and enter the site to view your credit info 😉
Something I should note is that, if you’ve frozen your credit report, the site will not be able to set up your account. To get around this, simply request temporary lifts for your Equifax and TransUnion reports so that Credit Karma can access them. Thankfully, after your initial setup is complete, you can refreeze your credit and continue using Credit Karma without issue.
Your dashboard and beyond
Once logged in you’ll be brought to your dashboard, starting with an overview. The first thing you’re likely to notice is two gauges that indicate two different credit scores: one from TransUnion and the other from Equifax. In addition to a number Credit Karma will also give you a basic adjective that best describes your credit standing. They seem to consider anything over 700 “Good” while over 750 is “Excellent.” On the other end, “Very Poor” is anything under 580.
A bit lower on the dashboard, you’ll also find alerts about notable increases/decreases to your credit card balance and usage alongside some product recommendations (more on that later).
Going back to the top, clicking on either of the gauges will take you to a page where you can dive into your score. This includes a chart plotting the history of your scores, a Credit Coaching section with various tips, a look at your credit factors, credit report, and more.
Credit factors and credit report
Credit Factors gives you a look at all of the categories that go into determining a credit score as well as a hint on where you stand in each. Next to that is the Credit Report tab. Something I like about Credit Karma is how readable it makes your credit reports, dividing it into clearly labeled sections. Here you’ll be able to see a list of credit accounts that report to each bureau and drill down for more information, including account status, credit limit, and payment history. Additionally, while I haven’t had to use it, Credit Karma also includes a link you can utilize to dispute and correct any issue you may find.
At this point you may be wondering how Credit Karma can offer such a service for free. Here’s how: credit card sign-up referrals. Yes, you will see ads for various credit cards while surfing the site. However, unlike normal advertisements you may encounter around the web, Credit Karma provides you with information about each card explaining why you may want to sign up for it.
Meanwhile the “My Recommendations” tab will give you a list of cards, personal loans, and more along with your odds of approval. It will also note a few of the features and details for each product. Admittedly, Credit Karma does do a nice job of displaying this information and does keep these ads to a relative minimum. However I suspect that those actually looking for a new credit card would be better served doing their research elsewhere. That said, if you do know what card you want and want to give Credit Karma a “thank you” for their free services, feel free to apply using their affiliate links.
Credit score simulator and other resources
Under the Tools section of Credit Karma (found either via the dashboard or under the Explore tab), you’ll find some helpful features including the surprisingly cool credit score simulator. Basically, before you decide to open that new card, close an old one, or get a loan, Credit Karma can tell you how your credit is likely to be affected by that decision.
In theory, this could be extremely helpful in stopping you from making a huge mistake. For example, the simulator once informed me that if my wife were to close her then 11-year-old credit card, her score could plummet more than 150 points since “age of credit” is a factor in calculating your score (for what it’s worth, now that it’s been six years and we have several other cards, the impact of closing this particular card would be negligible). Assuming you didn’t know that already, wouldn’t you be damn happy to have prevented that massive error?
Another Credit Karma hidden gem is also found in Resources (which, frustratingly, is a tab that seems to come and go depending on what page you’re on) is their Unclaimed Money finder. Here you can search various state databases to see if there are any funds under your name being held. If it does find anything, it will link you to the proper site and tell you how you can claim the money. I actually used this to find $50 the State of California owed me… which they proceeded to steal from me (but that’s another story). Nevertheless it’s a pretty nifty feature.
Elsewhere in Tools, you’ll find all kinds of specialized calculators, informative blog posts, and much more. In other words, don’t neglect this section of the site.
Identity theft and breach info
One interesting feature found in Resources is their Identity Monitoring. Here you can confirm whether your credit reports are frozen, which is pretty useful if you have indeed frozen your credit (which you might want to consider doing). But the real star here is Data Breach Monitoring where you can see how many breaches your information has been found in and what passwords have been compromised.
Inside the actual Data Breach Monitoring page, you’ll first see a list of passwords that have been exposed — in other words, don’t use them! However it’s important to note that this isn’t a complete list of passwords that may have been stolen by hackers. That’s because, in some cases, Credit Karma may be able to confirm that a password was accessed during a hack but not be able to tell you what it is.
For example, while the password I used for the site Canva wasn’t explicitly listed, clicking on the Canva hack listing noted that my password was indeed exposed. Incidentally I’m pretty sure that’s what led to my Spotify being hacked (seriously, don’t recycle passwords!)
In all, Credit Karma notes that my info has been found in 33 breaches. That’s astonishing although not all that surprising. With more breaches sure to impact us all, this is a super handy tool that might just help you prevent further headaches from hackers.
Credit Karma Money: Save and Spend Accounts
Over the years, Credit Karma has expanded its offerings and ventured into other areas of personal finance. One of these is their Credit Karma Money product. This is actually split into two offerings: Spend and Save.
First, starting with Credit Karma Money Save, this free account allows users to earn a healthy interest rate (currently 1.98% APY as of August 24th, 2022). Accountholders can make one-time deposits or arrange for automated transfers, making it easy to build up your balance.
To be honest, there’s really not much more to Credit Karma Money Save than that. The account doesn’t seem to be looking to replace your current bank account as it offers a limited number of functions. Instead it’s just an option for those who want to get into the habit of saving and earn a comparatively high interest rate in the process. However, customers can now pair the Save account with Credit Karma Money Spend.
Like Save, Spend is also free to sign-up for. When you do, you’ll receive a debit card that’s accepted wherever Visa is. With your spend account, you’ll have access to a number of checking features, including the ability to get your direct deposit funds up to two days early, have access to more than 55,000 fee-free ATMs that are part of the Allpoint network, and more.
However, one of the most interesting features of Credit Karma Money Spend is Instant Karma. When you make an eligible purchase with your debit card, you have a chance to be reimbursed for your transaction. This perk is capped at $5,000 per transaction, so it could prove to be a big win if you are lucky enough to trigger it. Unfortunately, at this time, it seems that customers who are residents of New York or Florida are ineligible for Instant Karma.
By the way, if you do sign up for either a Credit Karma Money Spend or Save account, your balance(s) will display prominently in your dashboard.
Credit Karma Tax
Finally, while it doesn’t have anything to do with checking your credit, I did want to mention Credit Karma Tax. This was a platform that allowed customers to prep and file their federal and state income tax returns for free. I actually tried this out for my 2017 taxes. However, Credit Karma Tax no longer exists — at least not under that moniker.
As part of Intuit’s acquisition of Credit Karma, the company was required to sell its tax prep platform. The buyer happened to be Block Inc., who renamed the offering Cash App Taxes. Luckily, the platform is still free to use, but is accessed via Cash App. So, while it may not be Credit Karma related anymore, you can still find the service they started over there.
How Accurate is Credit Karma?
That’s the $64,000 question, isn’t it? It can also be a little hard to give a definitive answer as your personal experience can vary based on a number of factors. Let’s take this piece by piece:
Credit scores are far more complex than most people realize. In fact, while most people associate credit scores with FICO, there are several other methods used by creditors as well. In the case of Credit Karma, VantageScore 3.0 is employed. What does this mean? Well it means that your scores may not match those provided by other services.
There are some similarities. Like FICO, VantageScore still grades on a scale ranging from 300 to 850. Additionally the factors that go into a score and the basic weighting behind each section are also the same. So really what it comes down to is a tweak in the algorithm that laymen like me aren’t exactly privy to that can lead to some discrepancies between other scores you may obtain.
Even some FICO scores can vary from others
Get this — not even FICO offers one standardized score. The number shown to a car loan lender might be different than what a credit card company sees as, once again, the algorithms behind how these scores are calculated can be altered slightly depending on the circumstance. What does this mean for Credit Karma? Despite what some commercials may tell you, you’ll almost never know exactly which one of your dozens of scores a creditor will see. While they should be fairly similar there’s also a bit of a range you should be prepared for. With that said…
You can still learn from Credit Karma’s tools
Even though your score may not be quite as high as Credit Karma would have you believe (or maybe it is? Again, this is all anecdotal) there’s still a lot of value in this free service. First knowing the range of where your credit sits is hugely important. After all, it’s what put me back in the saddle and ready to get serious about raising my credit.
Additionally the site allows you to view your scores often and see how your actions can affect your scores. While it’s probably not a great idea to babysit your credit, it’s very comforting knowing you can find this info easily.
Acquisition by Intuit
When I updated this post in 2020, Intuit had just announced that it was acquiring the site for a staggering $7.1 billion. At the time, a few things were unclear — such as what would happen to Credit Karma Tax (as I mentioned above, it’s now been sold to Cash App). Now that the deal is done, has anything changed?
In my opinion, aside from the spinoff of Credit Karma Tax, nothing major has impacted the platform. That said, I was a bit surprised to see that some of the features I mentioned in this post such as the Unclaimed Money finder and Identity Monitoring service were a bit harder to find. While they do still exist, they seemed to be buried under all sorts of offers and other links on the Credit Karma site.
To be clear, I’m not suggesting that Intuit’s ownership is the reason for this quirk. At the same time, the site hasn’t really added any notable new features to its core product (seemingly focusing instead on Credit Karma Money and other ancillary offerings). Still, it’s too early to say whether or not the purchase by Intuit was good or bad news for users.
Final Thoughts on Credit Karma
So Credit Karma might not be able to tell you exactly what your credit score is but the truth is you have so many scores that it hardly matters. What makes this free service great isn’t necessarily the credit scores it offers you but the tools it gives you to protect, monitor, and improve your overall credit. Plus, in my estimation, the Credit Factor section is a real eye-opener for many users while the Credit Simulator could be a real lifesaver.
Since I originally reviewed Credit Karma, I’ve had the chance to try other free credit sites as well. While I appreciate what WalletHub and others have to offer, there’s no denying that Credit Karma’s wealth of features and inclusion of not one but two educational scores help put them at the top of the heap. Therefore, if you’re ready to learn about your credit and begin working to improve it, Credit Karma is a fantastic place to start.