Money at 30: The Good and Bad of Credit Karma
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 other 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 set up is complete, you can refreeze your credit and continuing 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 the Take a Look section. Here you may get 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 and 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 was 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 Resources tab of Credit Karma, you’ll find some helpful tools 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 informed me that if my wife were to close her 11-year-old credit card, her score could plummet more than 150 points since “age of credit” is a factor in calculating your score. 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: 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 Resources, 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.
Credit Karma Tax
Finally, while it doesn’t have to do with checking your credit, I’d be remiss if I didn’t mention Credit Karma’s free tax filing platform. Credit Karma Tax supports a number of different tax situations and allows users to file both federal and state returns for free. I actually tried this out for my 2017 taxes but ended up switching to TurboTax last time around. Ultimately, although tax time might not be coming around for several more months, this is definitely something to keep in mind for next April.
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.
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 would be 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.