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Credit Karma

How Much Does Credit Karma Spend Giving You Free Credit Scores and Reports?

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Credit Karma truly changed the game a few years ago when they began to offer free credit reports. They also give you your credit score for free. Prior to this, you had very few options for accessing this important information. Now, thanks to their innovation, you can easily access your credit report and scores for free in several locations. But if they do this for free, then how is it that Credit Karma makes their money?

Credit Karma Changed the Game

Not too many years ago it was relatively challenging to access your own credit information. The credit companies seemed to obfuscate this information. It all felt like a big mystery to many consumers.

Of course, you could get your free annual credit report from each of the three major reporting agencies. However, you could only do that once per year. While accessing your free credit score felt a little bit easier, it was still a challenge.

It’s all different today. When you log in to your credit card accounts online, you often immediately see your FICO credit score. You can also easily access it, as well as your free credit report, from a number of sources. Credit Karma played a key factor in changing the world in this way. It’s been to the benefit of consumers who are now increasingly empowered to take control of their own finances thanks to the access they now have to this information.

Is It Really Free?

One of the big questions that people immediately ask is whether or not it’s truly free to get your credit report and credit score through the company. It is.

The reason people are wary is because historically “free” hasn’t actually meant entirely free. Other companies before Credit Karma offered “free credit reports.” However, you had to sign up for credit monitoring services with them. Technically, you could join a free trial, get your credit score and then cancel before you paid anything. However, canceling was often challenging, if you remembered to do it at all. Therefore, you ended up paying for the credit score after all. (Well, you paid for credit monitoring, but since you didn’t want it in the first place, you paid for what you did want, which was the “free” credit score.)

Credit Karma simply does not operate this way. You don’t have to give them any money. You don’t even have to give them a credit card that they could potentially charge money to. You enter your information and they give you your credit report and credit score for free.

If It’s All Free, How Does Credit Karma Make Money?

This company is a terrific example of the difference between a finance company and a finance company. Finance companies make their money primarily in dealing with money. Fintech companies, on the other hand, emphasize the “tech.” They offer innovative Internet-based solutions to problems. They provide tools that help with your finances. This is how they make their money (through a variety of channels.)

Credit Karma Got Capital Investment

First of all, when it was a young company, it operated like a tech company. In other words, it got venture capital. For example, in 2014, Google Capital gave the company $85 million in order to roll out new products. One of the key new products at that time was the ability to offer free credit reports. (They had already been offering free credit scores for six years.)

According to the VentureBeat article announcing that deal, Credit Karma pays out tens of millions of dollars annually to access those credit reports/scores. And yet, they (and their investors) believed that it would be financially worth it to make that investment.

Speaking of their investors, Google Capital wasn’t the only company to fund Credit Karma. Investopedia reports that they received nearly $900 million from eight rounds of funding over the years, although the most recent round was in 2018.

Credit Karma Makes Money Off of Advertising Products

Like many websites, this one has ads on the site. Moreover, they offer a variety of products and services to their customers. You don’t simply go on the website, get your credit score, and leave. Instead, you have the opportunity to access a wide variety of different services and tools that can improve your credit. If you use them correctly, it’s a win-win. You improve your credit score and the company gets a small fee any time that you utilize the services advertised on their site.

Like with so many other websites, if you click through to something that interests you on the site, you have the opportunity to purchase it. If you do, Credit Karma makes a little bit of money. The company has more than 100 million registered users, over 35 million of which are active monthly users. Those little bits add up for the company. So, for example, if you see a credit card offer on Credit Karma that you like, and you click over to it and decide to apply, then Credit Karma benefits. But you didn’t pay anything.

Intuit Purchased Credit Karma

Credit Karma has continued to do well over the years indicating that users appreciate what they have to offer. One of the things that they started to offer more recently was tax preparation services. So, it’s no wonder that Intuit – known in particular for owning TurboTax – took notice. In 2020, they announced that they will be purchasing Credit Karma for more than $7 billion. It’s their largest acquisition ever, meaning that they certainly think that there’s financial profitability here.

Interesting, Intuit also owns Mint. Mint and Credit Karma offer many of the same services. Both are personal finance companies that offer free credit scores through an app-based / web-based service. That said, Mint tends to focus heavily on assisting you with understanding and improving your credit. Credit Karma does something similar but emphasizes the free credit report and other services such as tax prep. It will be interesting to see over time how the time are similar and different now that they’re both under the Intuit umbrella. That said, currently Intuit plans to continue to have Credit Karma operate as a standalone service.

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Is the Credit Karma Free Credit Report a Scam?

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Credit Karma free credit report
Credit Karma recently made the announcement they would offer their users free credit reports on top of the free credit scores they already give. The question many people have when they hear about something like the free credit report is, “What’s the catch?” and, “Is it a scam?” The good news is the offer isn’t a scam, and for the most part, there aren’t any catches involved with getting it.

Is the free credit report really free?

Many companies that offer “free” credit reports technically come with no cost, but there’s a catch. In order to see the report, you have to give your credit card and sign up for a free month of credit monitoring with the company. If you cancel the credit monitoring before the month free trial is up, then you don’t get charged for anything. If you accidentally forget, your credit card ends up being charged. The FCC also reports that canceling can difficult, and it is not always done the first time you request it to be removed. So while the report is technically free, there’s a catch that can cost you money down the line.

Credit Karma set up their no-cost credit report offer the way they did with their no-cost credit score. There is no need to give your credit card to be able to see the report. They are able to do this because of the way they make money. Other sites make their money by selling the credit monitoring services, but Credit Karma makes its money through offering services where they get a commission if you sign up. These credit scores and credit reports don’t come cheap, as the company spends tens of millions of dollars to get them, but they make enough on the advertising to their users to more than make up for these costs.

Is it a real credit report?

There are some who take issue with the free credit scores from sites like Credit Karma, Credit Sesame and Quizzle. They question the efficacy because they aren’t FICO scores. There’s a debate as to whether this really matters or not, but it’s a concern to some people. They want to know if the credit report is from the credit reporting agencies, or if it’s some type of other credit score. Good news: The reports are legitimate.

In this instance, the credit reports given are from TransUnion and Equifax, and it’s the credit report you would get if you bought it directly from them. While it is a real report, it’s only one of the three main credit reports available. You do not have access to your Experian credit report from the site, although you can get your Experian report directly from them free of charge. You can also get your credit report for all three agencies at no cost once a year (plus in some other specific circumstances) from AnnualCreditReport.com (you can see how the Credit Karma and AnnualCreditReport offers compare here).

How Does This Help?

When you are looking for financing (or anything else regarding your credit), it is nice to have a leg up. Now, not all lenders disclose which reporting agency they check. Additionally, if you need a mortgage, they often take all three and average them. So, having the info helps you stay on track, but you will never know exactly what the bank sees until they show you personally.

How often can I see my credit report?

Many people wonder if the credit report is a one-shot deal. That is, once you’ve seen it one time, then you can no longer see it again to see if it has changed in the future. The answer it no. In fact, you can access your updated report as frequently as once every week if you desire. Although, many creditors only update the reporting agencies about once every month.

Conclusions

The Credit Karma free credit report is not a scam, or a bait and switch program. The only catch is that in order to get it, you will be given a lot of advertising offers which you can choose to accept or decline. You won’t have to give your credit card to access the report, but you do have to give them sensitive financial information. It comes with some risks, but nothing out of the ordinary for a credit reporting site.

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How Accurate Is Credit Karma-Our Review

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is credit karma accurate

Your credit score and report are critical for your financial well-being. That’s why many people actively track their information over time, allowing them to address issues or make choices to improve their situation. Credit Karma is one option for monitoring your details. But is Credit Karma accurate? Is Credit Karma the best way to track your credit score? If you’re considering questions like that, here’s what you need to know.

What Credit Karma Shows You

When you sign up with Credit Karma, you get access to various kinds of information. While much of what’s available is offers for financial products and services, users also gain insights into their credit.

By heading to the “Credit” section of the app, users can see their most recent score as well as an overview of how various credit factors impact that score. For example, there’s an entry for the user’s payment history, with the percentage reflecting the number of payments that are listed as on-time. It also has a notation for how impactful that factor is, with payment history being listed as “high impact.”

Those details help a person understand where they are shining and if there are specific areas where they could improve. This empowers users to take control of their credit, making sounder choices that lead to higher scores.

For users who want to take a deeper dive, they can view their full credit reports. Here, they’ll see their score again. However, they can also peruse a list of their accounts (open and closed), the state of those accounts, recent inquiries, accounts in collections, and more.

All of the details help a person see if there may be errors harming their score. Plus, they can scan the accounts lists looking for accounts that aren’t theirs, which could be a sign of a mistake or, in the worst-case scenario, identity theft.

Are Credit Karma’s Credit Reports Accurate?

Yes, Credit Karma’s credit reports are generally accurate. In reality, Credit Karma isn’t creating a new credit report. Instead, it’s pulling information directly from a credit bureau or two and showing that information to you. As long as the source credit bureau’s information is accurate, Credit Karma’s will be as well.

Typically, the only time this isn’t the case is when there’s new activity. Credit Karma does refresh the information as frequently as every seven days, depending on how often you log into the app. That means if something changes in your report before the next refresh, the information may be out of date.

Additionally, since Credit Karma relies on reports from bureaus, if a bureau doesn’t have a recent activity on your report, it won’t show for Credit Karma either. For instance, it can take 30 to 60 days for a new account to show up on your credit report.

Plus, not all lenders report to all bureaus, so information may be missing because that bureau wasn’t informed of that account. That’s one of the reasons why your report and score can vary from one bureau to the next, as they are working off of different information.

In those scenarios, the information you see from Credit Karma isn’t technically inaccurate. It’s correct based on what the bureau knows. The trick is, the reporting system itself isn’t perfect.

However, errors in credit reports are always possible. If the credit bureau has incorrect data or you’ve been the victim of identity theft, Credit Karma’s report will also have that inaccurate information. Again, this isn’t the fault of Credit Karma as they have no way of knowing that there’s an issue with the bureau’s data. If that occurs, you need to reach out to the bureau, not Credit Karma, to get it corrected.

Are Credit Karma’s Credit Scores Accurate?

Yes, Credit Karma’s credit scores are mainly accurate. The issue is, Credit Karma doesn’t use the credit score you’re expecting, and that can make it look like there is a discrepancy when there isn’t.

When people apply for credit, the lender usually pulls FICO credit scores. Since they are more widely used, these are the credit scores people are used to seeing.

However, Credit Karma provides users with their VantageScore (currently based on the VantageScore 3.0 model). That isn’t as widely used by lenders when they decide whether to extend a person credit, up a credit limit, or make a similar lending decision. This decreases the degree of familiarity with the scoring model.

This wouldn’t be in issue if the VantageScore and FICO score were calculated in the same manner. However, even though both use the same score range (300 to 850), how a VantageScore is calculated does differ from how a FICO score is calculated.

As a result, a user’s VantageScore and FICO score can be dramatically different, which can cause some confusion. But that doesn’t make either one inaccurate; they simply use different approaches to determine a person’s creditworthiness.

Generally, people’s VantageScores and FICO scores do align to a degree. For example, if your VantageScore qualifies as “good,” there’s a strong chance your FICO score does as well. However, some people do see deviations. For instance, they might have a “good” FICO score and a “fair” VantageScore, even though those scores came from the same bureau.

Using Credit Karma to Track Your Credit

Ultimately, Credit Karma is accurate. You just have to understand that most lenders don’t look at your VantageScore when deciding whether to approve you and that your VantageScore does differ from your FICO score.

But even with that, that doesn’t mean you can’t make the most of Credit Karma. You can monitor your account lists for signs of errors or identity theft. Tracking your credit score is also a good idea. Usually, if your VantageScore rises, so does your FICO score, so you can use Credit Karma to see if you’re making positive progress.

Plus, Credit Karma is free. The company makes money through partnerships with the financial product and service providers it advertises or recommends. Users never pay directly for the service, which is another reason it’s worth considering.

In your mind, is Credit Karma accurate? Do any of the discrepancies above leave you concerned? Have you ever had an issue with the quality of Credit Karma’s information? Share your thoughts in the comments below.

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How Often Does Credit Karma Update?

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How often does credit karma update

In the early 2000s it seems like a lot of credit monitoring sites popped up out of nowhere. Many people were wondering whether or not they were legitimate and hesitated trying them. Now sites like Credit Karma are some of the most-visited sites on the web.

If you’re looking to monitor your credit score or improve it, Credit Karma is a great way to do so. The website offers users a number of services, but how often does Credit Karma update?

What is Credit Karma?

Credit Karma’s mission is to make financial progress available to everyone. The website and app provides users with tools and educational supplies to help themselves get to a better place financially. While many other similar companies charge to view your credit score, Credit Karma is able to remain completely free for users.

How to Use Credit Karma

The company is trying to do some great stuff for its users but how easy is Credit Karma to use? Well, like most things today, if you know how to use the internet or a smart phone you can use Credit Karma.

Setting up your account is extremely easy. You provide some basic information (on the app or website) and your account is set up. Once you receive a confirmation email you’ll be able to monitor your credit score and items in collections. You can also use Credit Karma to start paying off your debts and bettering your score over time.

As mentioned before, Credit Karma also offers users a number of educational supplies and even the option to reach out for advice. The folks at Credit Karma also gather up articles and other helpful information for all of its users. You can also get recommendations on loans and credit cards that would be suitable for someone with your current credit score. But, if you’re working on your credit score you may be wondering how often Credit Karma updates its score.

How Often Does Credit Karma Update?

Credit Karma provides its users with a fresh credit score every week. Depending on the day you signed up, you’ll get a new score in exactly one week. Viewing your score this way won’t impact your credit score at all and you can get a good idea of the steps you may need to take to better your credit (or maintain).

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Other Credit Score Apps

Credit Karma isn’t the only website/app offering free credit score reports either. There are many other apps and sites that are offering similar services. Some research and popular opinion have pointed to the following three sites as good Credit Karma alternatives.

  1. Credit Sesame: Credit Sesame is similar to Credit Karma in many ways. It is also a free credit monitoring service. They also offer the same information and similar resources for their users. If you’re looking for a Credit Karma alternative, Credit Sesame is a great place to start.
  2. Credit.com: Credit.com is another good place to go if you’re trying to get a snapshot of your score. It is similar to Credit Sesame and Credit Karma in many ways. By signing up you’ll also get some great Credit.com subscriber emails with tips on how to improve your score.
  3. Select credit cards – Discover Card: Some credit cards offer free credit scores for their customers. Discover card, for instance, gives all of its users a free FICO score once a month. If your credit card company does this it is a great alternative to Credit Karma.

Whether you’re trying to improve your credit score or find out if you can lease a new car, knowing your credit score is important. Staying up to date with an app like Credit Karma is a good idea!

Photo: Fabric Eleven

Does Where You Live Impact Your Credit Score?

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Where You Live Affect Your Credit Score
Your credit score is more important than you know. People are constantly looking at it, making decisions about your ability to handle finances. That number can impact all different parts of your life and, while it is just a number, it can prevent you from doing a lot of things. Missing payment on a bill or ignoring creditors can be a big mistake. However, according to a new survey, where you live may have an impact on how you handle debt collectors and how much of your debt is sent to collections too.

Does it really matter where you live when it comes to finance? Well, maybe. According to a new survey released by Credit Karma, there may be some kind of connection between the two. People ages 18 to 24 Taking a look at the 100 largest cities in the United States, the company was able to determine where this age group seemingly has the most debt in collections.

Utility bills, credit card payments and other debts can be easily thrown away. Seeing a debt collector on your caller ID can make it pretty easy to dodge them too. However, throwing it away and ignoring it will not make your debt disappear. Eventually, your debt will be sent along to a collections agency which leaves a mark on your credit report for more than seven years. Young people are especially vulnerable to this.

According to recent studies, only about 28 percent of people between 18 and 24 received any kind of financial education prior to college. Forty-four percent of that same age group has said that they’ve already had accounts sent to collections. But, it seems that they are way too young for that to have happened, right? Well, no. Most 24-year-old have at least one item in collections right now.

This type of financial hardship seems to be running rampant in certain parts of the country. Certain cities seemingly have more young people in debt than others. Is it because they have more young people in the area or because that area simply doesn’t provide enough financial education to these young folks to make a difference? It is up for discretion, however, it is most likely the latter rather than the former sending these young men and women into debt.

The following 10 cities have the most people ages 18-24 who have items that have been sent to collections (city and average number of items in collections – rounded the nearest tenth):

  1. Milwaukee, WI: 3.2
  2. Louisville, KY: 2.3
  3. Indianapolis, IN: 2.3
  4. Charlotte, NC: 2.2
  5. Greensboro, NC: 2.2
  6. St. Petersburg, FL: 1.2
  7. Las Vegas, NV: 2.0
  8. St. Louis, MO: 2.0
  9. Reno, NV: 2.0
  10. Birmingham, AL: 1.9

It seems that throughout the entire country (and maybe especially in North Carolina and Nevada) people are having difficulty managing their finances before they even hit the age of 30. Though a bit disheartening, there may be something to take away from this (and no, it’s not to avoid these cities). There needs to be a movement, nationwide, to better financial education for people prior to heading off to college. It could make all the difference in these people’s lives.

Photo: Flickr: Simon Cunningham

Credit Karma Targets Consumers with No Credit Score

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Credit Karma ffers information to those with no credit score
There are about 15 million people who don’t have a credit score, and Credit Karma wants them to visit their site as well. Although it may seem somewhat ironic that a website which made its name by giving people free credit scores without having to hand over their credit card number would now want to help people who don’t have a credit score at all, the reality is it makes a lot of sense. Credit Karma has expanded their services to also give out two types of free credit reports and with this expansion, it makes more sense that they would want to help consumers who have what the industry calls “thin files” — those people who don’t have a credit score because there isn’t enough credit history and information to calculate a score.

If someone didn’t have enough information in their file to create a credit score in the past, those trying to use the site would be informed of this, and told they would receive an email when there was enough information for them to have a credit score. That is no longer the case. Those who sign up with Credit Karma will be shown their current credit report even if there isn’t enough information in it to produce a credit score. In addition, they will get information explaining why they currently don’t have a credit score, along with steps they can take to begin creating a credit history to get a credit score.

Credit Karma obviously sees this as an excellent opportunity to beef up their bottom line. Consumers who don’t have a credit history can be quite lucrative to a company like Credit Karma, since it can be easier to convert them on offers the site provides. This means the site can recommend credit cards and other types of loans which can help to build credit, which is how they make money. This gives Credit Karma more opportunities to get consumers to adopt products because thin file consumers don’t have to be convinced to switch from a product they already have.

Credit Karma isn’t the only one who understands that thin file consumers need more access to a score. FICO has a new credit score aimed at those potential borrowers who have thin files by taking into account bill payments that aren’t normally used for credit scores such as mobile phone, cable TV, Internet, and utility payments. The FICO Expansion Score takes into account your bill paying history to form a credit risk score.

For those who don’t have enough information in their credit history to currently warrant a traditional credit score, understanding why they don’t can be an important step toward making a decision of whether it’s worth it for them to get one. Since there are a lot of compelling reasons to have a good credit score rather than none at all, including it allows you to save a lot of money,