See if this offer of a totally free credit score is legit in our review of Credit Karma. We cover what they offer, how it works, what you get, and if it’s truly free.
You’re probably familiar with Credit Karma from their ads on TV, and especially on the web. They’re an online credit score provider. And they provide those scores for free. Does that get your attention? It should because Credit Karma provides a pretty solid package.
About Credit Karma
Credit Karma launched 2007 and began offering free credit scores in 2008. Now more than 75 million people use its service. It works on a simple premise: sign up for the service, and get your credit scores for free.
It’s easy enough to see how that kind of offer would take off. They sold me on the service. I joined a couple of years ago and can report that I’m pleased with what I’m getting. Credit Karma won’t change your life. But it will let you keep an eye on your credit score on an ongoing basis, and that’s important in today’s world.
One of the advantages that Credit Karma offers over most other free credit score services is that you get two scores, one each from TransUnion and Equifax. Most other free credit score services offer only one.
Also, as the years have passed and the service has grown, they have expanded their menu of products and services. As you’ll see in this review, Credit Karma has grown to be a full-fledged credit services provider. They’ve even recently added a tax preparation service to the list.
How Credit Karma Works
When you sign up for Credit Karma you’ll have instant access to your most recent credit scores from TransUnion and Equifax. The scores are updated every 30 days and are available on your Credit Karma Dashboard at any time.
One of the things I like about the service is that you get more than just your credit scores. Each score has a Score Details link. It brings you to a page that gives you the reasons for that score. The information provided comes close to being a full-blown credit report. And from what I’ve seen, the information is accurate and up-to-date.
The link shows the five categories used to determine your score:
- Credit card use
- Payment history
- Derogatory remarks
- Credit age
- Hard inquiries
(With regard to inquiries, the credit information drawn by Credit Karma isn’t charged as an inquiry on any of your credit reports, so that won’t be a concern.)
Details are provided under each of the five categories. For example, it will list your outstanding credit card balances, your loan payment history, derogatory information, and any items that may be listed in your public records.
With the details provided, they offer suggestions as to how you can improve each category. They even offer methods to dispute errors on your credit reports.
All in all, Credit Karma provides the user a way for you to monitor your credit, make improvements, and respond to any erroneous information. And they provide it all for free.
A Word About Credit Karma Credit Scores
You’ve probably heard (or experienced yourself) that the credit scores you get from free credit score services aren’t the same as the ones lenders use. That’s actually true. There’s a good reason for it, and it applies to Credit Karma as well.
What Credit Karma has in common with other services is that the credit scores provided are not your actual FICO score. Instead you’re provided with an educational score based on the VantageScore model.
Now you might be wondering why you get educational scores rather than your actual FICO score. But that’s the “secret” behind “free,” as in free credit scores. The educational score is free. An actual FICO score would require you to pay a fee.
That doesn’t mean educational scores are completely worthless. They’re constructed from the same credit information used in calculating FICO scores. They even use similar methodology. But they aren’t exact, and that’s where the difference comes in.
At a minimum, educational scores like VantageScore offer parallel scores. They can let you know the relative level of your credit, and perhaps more importantly, alert you to significant changes. And that’s really the whole point in tracking credit scores. A major change in your score could indicate a mistake you made, or even fraudulent use by another party.
In addition, regular access to your credit score is absolutely necessary if you’re working to improve it. If you’ll need that access on an ongoing basis, it’s better to get it for free.
Also keep in mind that even FICO provides many different scoring models. You’re never sure which model a potential lender will look at. So there’s always a change, even with official FICO scores, that your lender will see a slightly different score than what you see.
Features and Services Provided by Credit Karma
Apart from providing credit scores and credit information, Credit Karma also offers a number of services and features to help you manage and improve your credit. They’re available on the platform as drop down tabs at the very top of the screen. They include the following:
Credit Simulator (Click “Resources”, then “Tools”). This might be the most valuable tool on the site. It enables you to run credit scenarios to see what the impact will be on your credit scores. As an example, you can check to see how much paying down one or more loans will improve your score, or how a recent late payment will bring it down. The tool gives you a real opportunity to plan your credit improvement strategy in advance, knowing how each change will affect your score.
My Recommendations. This feature offers lending suggestions based on your credit. It will display loans you’ll likely qualify for based on your credit profile. Credit Karma provides the interest rate and terms, and even the likelihood of approval. You can use the loans to consolidate or refinance your existing debt so you can pay it off more quickly.
Credit Cards. This is a drop down list that enables you to select very specific credit card offers. You can group them by the best offers for balance transfers, interest rate, rewards points, and other valuable features. It lets you compare offers to determine which will be the best for you.
Loans. This tab provides you access to information for loans other than credit cards. These include personal loans, auto loans, student loans, business loans, and home loans. It will give you an opportunity to search for the best offers in each category, similar to what you can do with the credit card search. Auto loans have a dedicated page. There you can find the best deals to either purchase a new car or refinance an existing car loan.
There’s also an “Auto” tab that isn’t what you think (auto loans). It actually answers the question What’s on your motor vehicle records? This is good information to have since it will affect how much you’ll pay for car insurance.
Credit Calculators. Credit Karma offers several calculators to help you manage your credit, improve your credit scores, or get out of debt. These include a mortgage refinance calculator, debt repayment calculator, simple loan calculator, and loan amortization calculator. The debt consolidation page explores the merits and drawbacks of different debt solutions, including bankruptcy and credit counseling, in addition to debt consolidation.
Credit Karma Tax
This is a service Credit Karma just rolled out in 2017, in time for the 2016 tax filing season. But like everything else with this service, it’s completely free to use.
I haven’t used the service myself, but it looks to be all-inclusive. It can accommodate all forms used to prepare individual income taxes. That includes:
- Schedule A: Itemized deductions
- Schedule C: Self-employment
- Schedule D: Capital gains and losses
- Schedule E: Supplemental income (rental real estate or K-1s from partnerships and S Corps)
Credit Karma Tax can also prepare your state income tax, and e-file both the federal and state–free. They can’t accommodate some of the most complicated returns, including multi-state filers, business income tax returns, or state returns for married filing separately in community property states.
Some of the features on Credit Karma Tax include:
Click and Fill. This feature lets you take a picture of your W2, and Credit Karma Tax will use it to complete your return. It will reduce input on your part, and make the process go faster.
Import prior year’s return from other services. You can import your return from TurboTax, TaxAct, or H&R Block. This is another valuable time-saving feature.
24/7 Support. The online chat is available at all times if you have a question or get hung up on something. The support is also free.
Earlybird Advance. This is a no-fee, no-interest loan that can provide you with $500 to $1,000 on a prepaid card while you’re waiting for your refund to arrive. It’s an excellent feature if you need some of your refund in a hurry.
Is Credit Karma REALLY Free?
You’ve undoubtedly heard the saying, If it sounds too good to be true, it probably is. That might be what you’re thinking about Credit Karma being free. But as a subscriber, I can tell you that it is, and there are no strings attached.
There is no fee to sign up or use the service. And unlike many “free” credit score services, they don’t even require you to put a credit card “on file.”
They don’t need to because that’s not how Credit Karma works.
No, Credit Karma isn’t a charity. They are in it to make money. But like a lot of services in the cyber age, they do it in a very different way.
Credit Karma is very open in advertising that they earn revenue from the lenders and other service providers that are on their web pages. You can use the site for free, but if you click on any advertiser’s ad and sign up for the service, Credit Karma will take a cut of the fee. That keeps the Credit Karma site free to its users.
The only real downside for Credit Karma users is that you have to be willing to accept ads on the site, including Credit Karma recommendations while you visit the site. But that’s a small annoyance for a fully-loaded free service.
One more thing worth mentioning–Credit Karma pledges that they won’t sell your information to other vendors, or place you on a mailing list that they’ll sell for additional revenue. In my experience, they keep that promise.
Credit Karma Pros
- The service really is free. You don’t even have to add any credit card information.
- You can access your account any time, though the information is updated only once each month.
- It’s a reliable way to monitor your credit, either to look for unauthorized activity or as part of a long-term plan to improve your credit scores.
- You may be interested in some of the lenders who advertise on the site. They are specific to your credit profile, which will avoid an extensive search – as well as declines for offers you don’t qualify for.
- The tools on the site can help you improve your credit and your credit scores.
- Credit Karma Tax offers free self-preparation, though I haven’t used the service and can’t comment one way or the other.
- You won’t get bombed by Credit Karma email ads; at least I haven’t.
Credit Karma Cons
- The credit scores provided aren’t actual FICO scores used by lenders.
- The site is ad-rich, which isn’t that much of a distraction.
Should You Sign Up with Credit Karma?
Given the price–free–Credit Karma should definitely be in the running if you just want to keep an eye on your credit or work on improving your credit scores. The website is very user friendly. It presents the information in an easy, user-friendly format. You can get as much or as little help with credit issues as you choose.
Unlike a lot of free credit score services, they don’t bother you with unsolicited e-mail ads, nor do they provide your information to others to do the same.
I can’t vouch for the tax service, but I found the credit reporting and scores to be useful. They track your actual credit information, which is most of what people need. The scores may not be the exact ones used by lenders. But they’re close enough to give you a close approximation of what your FICO score will be.
You can certainly pay to get your actual FICO scores from all three credit repositories. But it’s probably not worth the price most of the time. Not when Credit Karma offers a legitimately free service that gets you close enough to the real thing.
If you’d like to get more information, or if you’d like to sign up for the service, visit the Credit Karma website.
Published or updated March 5, 2018.
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