free credit score

Does Credit Karma Ask for Too Much Sensitive Financial Information to be Safe?

September 2, 2014 By Jeffrey Strain 4 Comments

Why does Credit Karma ask for so much financial information

Credit Karma provides credit tools and financial monitoring services to help consumers keep track of their credit report and score. While they have a number of no-cost services, the main two are giving consumers their free credit score and free credit report. In doing this, they use data from the TransUnion Credit Bureau. Instead of charging a fee for their financial services and credit tools, their revenue is generated through highly targeted advertising offers. There are several other similar competing sites which do this as well such as Credit Sesame and Quizzle.

Does Credit Karma request too much information?

One complaint about Credit Karma is the company requests an extensive amount of sensitive personal and financial information when you sign up for their services. If this information were to fall into the wrong hands, it could easily be used to steal a person’s identity. With this in mind, there are quite a few people who are reluctant to give this information simply to acquire a free credit score/report.

The problem is Credit Karma needs this sensitive information, at least much of it, in order to obtain your credit score/report. Without the information, they would be unable to know if they are pulling the information for the correct person. That means you’ll have to give your social security number along with other identifying information in order to obtain their offers. The company asks for the information because they can’t provide the free reports without it.

Is it safe to give this sensitive information to Credit Karma?

The question then becomes will the company be able to keep this sensitive information safe so it doesn’t get stolen? There is always a risk in giving sensitive information to a third-party company, as it gives this information another place where it might be intercepted by identity thieves. Credit Karma also doesn’t have the best track record in keeping this information secure. They recently had to settle with the FTC for not keeping their mobile app secure, and potentially leaving their users vulnerable to “man in the middle” hacking attacks.

Can you delete your information?

Another question to consider is do you want to give your sensitive financial information to Credit Karma forever? If someone wishes to deactivate their account from sites which give free credit scores and reports, then the companies will deactivate the account. That doesn’t necessarily mean, however, all your information has been deleted. In actuality, it’s common for these companies to keep all of the personal information of their former users. While it’s common for a website to retain information after an account is deleted, most websites do not have your personal financial information.

Is it worth the risk?

Ultimately, the question each person needs to ask themselves is whether or not getting access to a free credit score and credit report is worth the risks involved. In the scheme of things, the risks are probably fairly minimal considering a lot of this information is available in other ways. That being said, there is certainly more of a risk than if you didn’t give them the information in the first place. In the end, it’s important for each person to understand what information they are willing to give, and the risks involved in giving that information, to obtain a no-cost credit score.

(Photo courtesy of Scott Schiller)

Are Credit Cards Beating Credit Karma at Its Own Game?

July 29, 2014 By Emie Fortney 10 Comments

Credit Karma versus credit cards for free scores

Credit Karma is currently the king of free credit scores, but that crown may be in jeopardy. Major credit card companies, such as Discover, Barclaycard and First Bankcard are now offering free credit scores to their customers as part of their monthly billing statements. Due to credit card companies entering into the free credit score business, this service area is undergoing another big change. The question is whether or not this change will leave Credit Karma as a second-rate player rather than a leader. Unfortunately, the future looks questionable for the company.

This trend isn’t likely to change, and it will likely only increase with more and more credit cards offering free credit scores in the future. FICO has been negotiating with other large credit card issuers to bring FICO scores to their monthly statements. If these plans go through, millions of consumers will no longer need free credit score services like Credit Karma, Credit Sesame and Quizzle, because they will be getting their scores automatically each month. They will also be getting their FICO score and not a FAKO score.

The bigger question is whether or not banks will soon be following this new trend as well. Consumer advocates are now beginning to push for financial institutions to provide free credit scores to consumers in an effort to help them gain a better understanding of how credit reporting and their personal credit scores work. If this trend takes hold, then it’s possible banks and credit card services everywhere will offer free credit scores along with their regular services. This shift would place Credit Karma and services like it in a position where they may not be able to survive. All these services have a number of obstacles to overcome in order to stay relevant in this rapidly changing free credit score reporting service world.

One of the biggest issues facing Credit Karma is convenience. They have managed to grow into the number one business in the field of providing credit scores by providing the convenience of obtaining the score for no cost and without a credit card. With credit card companies now beginning to provide consumers with credit scores on their monthly statements, and the possibility of banks and other institutions following suit, Credit Karma is losing the convenience factor, which underpinned a lot of its success.

On the upper hand, it’s not all doom and gloom for the company. Their services still offer consumers the benefit of having access to their credit score once a week, whereas credit card companies and other institutions only offer them once a month. They also offer more than just credit scores. They offer tools to help people see how decisions they make end up affecting their credit score. While it appears that the credit card companies are also moving in this direction, they aren’t providing this service as conveniently as Credit Karma is at the moment.

The company has also seen a great deal of support from investors who have a firm belief that they will be able to successfully overcome the obstacle of remaining a relevant service. Tiger Global Management, Google Capital and Credit Karma’s existing investors all contributed to raising approximately $85,000,000 in new financing to help the company out while they work to readjust and overcome the new obstacles they are facing. Considering that Credit Karma already has a history of finding new and unique ways to serve their customers’ needs, investors are more than confident they will soon overcome the new challenges placed before them.

There are definitely some major changes taking place in the world of free credit score providers. In a world that is consistently becoming more dependent on technology and convenience, it’s no surprise that it’s becoming easier and easier to obtain your personal credit score. With such a wide variety of financial institutions now jumping onto the bandwagon to provide credit scores to their consumers, it will definitely be interesting to see how Credit Karma will be able to grow and thrive as a business with the increasing competition.

Credit Karma Won’t Be Giving FICO Scores Anytime Soon

July 1, 2014 By Jeffrey Strain 4 Comments

Credit Karma isn't likely to give a FICO score.

Now that some credit card companies are giving FICO scores to customers with their monthly statements, some people wonder why the free credit score companies don’t simply begin providing users with their FICO score as well? Many of these free credit score companies like Credit Karma, Credit Sesame, and Quizzle give their users a FAKO score (also called an “educational score” by the industry) rather than their FICO score. A FAKO score is one that uses a similar scoring system as is used with FICO, but it’s not a score from MyFico. There are arguments as to whether a FICO score is better than a FAKO score, but most people would probably prefer to have a FICO score over a FAKO score if given the choice.

There are a number of good reasons the free credit score companies decide to do choose FAKO over FICO. They include the following:

Cost: The cost of a FICO score is more than a FAKO score, and switching would make their revenue model more difficult to work.
Purpose: The main purpose for the score isn’t the same for both. Credit Karma and sites like it use the score for educational purposes to teach users how doing different things will affect their credit score, while the FICO score is used by lenders to evaluate the risk in giving a person a loan.
Adequate: While not the same, it adequately gives the information users want, and there’s debate as to whether or not it’s any less beneficial than a FICO score.
New: It’s only recently happened that FICO scores have become available at no-cost with the introduction of credit card companies giving them away with the user’s monthly statement.
Demand: At the moment, there doesn’t seem to be a great demand by users for a switch to be made.

With the free credit score companies having chosen to use FAKO scores, the question becomes, will these free credit score companies ever give their users their FICO score, and what would have to occur in order for that to happen?

Is It Feasible?

The first question to ask is whether or not it’s even feasible for the free credit score companies to offer a FICO score, and still survive. The fact that no Credit Karma clone is offering it, which would instantly differentiate themselves in the market, might very well mean that it’s not possible with the way their revenue model is set up. If it’s ultimately possible, it would mean much smaller profit margins than they are currently able to get.

Compelling Reason

In order for these sites to make the switch, they would need a compelling reason to do so. One might be users deciding a FICO score is better, and choosing to use websites that offer it over those that don’t. That’s not currently the case, but it could happen if users become more educated about the scores and begin to demand one over another.

It Becomes a Liability

Again, this is currently not the case and it doesn’t appear it will be in the future. If, however, a FAKO score becomes viewed as inferior, it could end up being a liability, which makes it difficult for the companies to maintain their customer base and continue to grow. If this happens, they would be much more likely to consider the switch.

Will It Happen?

Within the current climate, it seems to be a long-shot that any of the no-cost credit score companies will switch over to begin providing a FICO score. There simply isn’t the compelling reason for them to do so at this time, and it doesn’t appear there will be any reason for the foreseeable future. That being said, it’s a dynamic industry with each of the competing companies trying to differentiate themselves from the rest. As competition continues to increase from credit card companies and banks, there may come a time when the switch makes sense. Until then, if you want a free FICO score, you’ll have to get it through a credit card company, rather than from sites like Credit Karma.

(Photo courtesy of Sean MacEntee)

Why Credit Karma Doesn’t Give Members Their FICO Score

June 24, 2014 By Jeffrey Strain 1 Comment

Why do free credit score companies give a FAKO score

One of the things which stands out when looking at websites like Credit Karma, Credit Sesame, and Quizzle is they don’t give their customers their FICO score. Instead, they give a FAKO score (sometimes referred to as an educational score), which is an approximation of a FICO score. The question is, why don’t these free credit score sites give their users their FICO score? Below are some of those reasons:

Cost

One of the biggest reasons the no-cost credit scores offer a FAKO score is cost. Credit Karma and the other free credit score sites get charged by the credit agencies (either Experian, Equifax or TransUnion, depending on which one they use) to access scores for their users. The educational score is less expensive than a FICO score. Since these websites have a revenue model which doesn’t have a guaranteed source of income (They don’t charge a fee, but they hope users will use products and services they recommend. When they do, the sites receive referral money from those companies where the users sign up.), they need to keep the cost of the credit score as inexpensive as possible.

It Serves a Purpose

While the way these companies attract users to their site is with the offer of a free credit score, the truth is they aren’t really credit score websites, as much as they are credit information and educational sites. In this sense, the credit score itself isn’t all that important. What’s important is understanding and being able to see how the score increases or decreases over time, depending on the actions the user takes. For this purpose, the FAKO score does its job just as well as a FICO score would.

FICO Not Necessarily Better

The free credit score companies would argue the score they give to customers is just as good as a FICO score because there isn’t a single FICO score anyway. While lenders do pull your credit score when you apply for a loan, each industry has their own score which is weighted toward the risk-factors of concern to that particular industry. That means your FICO score will be different depending on the type of loan you want. The score you get for a car loan will be different than one for a credit card, which will be different from one for a mortgage. In all, there are approximately 50 different FICO scores. Since a single FICO score doesn’t exist, and all are slightly different, the FAKO score can be just as useful when discussing general credit topics.

Free FICO Scores Are Relatively New

The last few years the FICO/FAKO debate wasn’t an issue because the only free scores available were FAKO. If you wanted a FICO score, you had to pay for it. That all changed when credit card companies like Discover (as well as a variety of others) began to give out true FICO scores to their customers for free. Until recently, there wasn’t a reason for the no-cost credit score companies to even consider switching.

No Overwhelming Demand for Change

There currently isn’t an overwhelming demand from consumers for any specific type of score. There are likely a number of reasons for this, including many people simply not knowing there’s a difference between the scores. Unless there’s more consumer demand for a FICO score as opposed to a FAKO score, there’s really no incentive for the companies to switch from the ones they’re currently using.

(Photo courtesy of Sean MacEntee)

Credit Karma Rivals: 5 Credit Cards Offering Free Credit Scores

June 16, 2014 By Jeffrey Strain 2 Comments

Credit Karma rivals: credit cards offering no cost FICO credit scores

It used to be those playing in the free credit score arena knew each other well. Credit Karma was the king, with others like Credit Sesame and Quizzle trying to dethrone it. While they were all battling each other, a new set of competitors tip-toed through the back door, and they look poised to completely change the free credit score landscape. The new competitors are credit card companies which are giving no-cost credit scores as part of their monthly statements to card holders.

These new rivals have the potential to completely disrupt the industry, because they already have a customer base which doesn’t need to be built from scratch. They also provide the credit score directly to their users, whereas the users must come to the traditional free credit score sites like Credit Karma. This shift occurred at the behest of the US Consumer Financial Protection Bureau, which began to urge major credit card issuers to provide free credit scores, along with related credit score information, to their customers. The bureau felt providing this information would help alert customers to possible identity theft taking place, along with giving them a better understanding where their finances stood. Slowly, but surely, credit cards have begun to offer this service to their users. Below you’ll find five credit cards which will provide you a free credit score simply for using their card:

Discover

Discover now provides your credit score each month along with your monthly credit card statement for free. The score is your FICO 08 Bankcard Enhanced version, based on the TransUnion report, which is the one which would be used by credit card companies.

Capital One

Capital One put together something more like Credit Karma than Discover for their card users. They created a destination area on their website called “Credit Tracker” where users can access their credit score, credit report summary/history, and free credit monitoring at no cost. The score they give is a FAKO score, not a true FICO score which is what all the free credit reports sites do.

First Bankcard

The First Bankcard offers the FICO 08 Bankcard Score (the one used by credit card companies) at no cost which can be accessed online 24/7. They also have information for users about what factors affect credit scores and steps which can be taken to strengthen the user’s financial health.

Barclaycard

The Barclaycard also offers a free FICO 08 Bankcard Score through TransUnion. In addition, it provides some factors affecting your score and historical tracking of your score.

Walmart Credit Card

Those with a Walmart credit card also have free access to their FICO Score through TransUnion each month. In addition, there is information to understand issues helping and hurting your score, free educational tools for establishing and keeping good credit, and up to 12 months of credit score history.

This is likely just the tip of the iceberg. Over time, chances are more and more credit cards will include their users’ credit score at no cost as an added bonus for using the credit card. Currently it’s an added perk which helps some credit cards differentiate themselves from others, but it certainly could become common to see with the majority of cards in the future, which will give the free credit score websites like Credit Karma a run for their money.

(Photo courtesy of Dino Husejnovic)

Credit Karma Alternatives for a Free Credit Score

June 2, 2014 By Jeffrey Strain 2 Comments

There was a time when the only way you could get a free credit score was to hand over your credit card. You would usually have to sign-up for a credit monitoring service as part of the deal which wouldn’t initially cost anything for the first month, but if you forgot to cancel the membership, your credit card would be charged. While there are still companies out there offering credit scores in this manner, it’s no longer essential for you to have to give a credit card in order to obtain a credit score.

Probably the most popular option to get a free credit score which doesn’t require a credit card is from Credit Karma. They offer a number of different FAKO credit scores (FAKO scores are often called “educational scores,” and they’re not an official FICO score which lenders use). The scores they offer include the Auto Insurance Score, TransRisk New Account Score, and VantageScore all through the TransUnion credit reporting agency.

While they’re the most popular choice, they aren’t the only choice available to you. There are a number of other websites and companies which offer a free credit score without you having to give a credit card. Below you’ll find a few legitimate alternatives to Credit Karma where you can also get a credit score at no-cost.

Credit Sesame

Credit Sesame works much the same way as Credit Karma, but they deliver a different FAKO credit score to their users. Credit Sesame uses Experian’s National Equivalency Score. They also offer free identity theft protection insurance which differentiates them from other competitors, most of which only offer the no-cost credit score and credit monitoring. (their site)

Quizzle

Quizzle is another service whitch offers a no-cost FAKO score to its users, but it delivers a different credit score service than both Credit Karma and Credit Sesame. Quizzle uses Equifax’s VantageScore. (their site)

Credit.com

Credit.com is another website which offers a free FAKO credit score to their users. Their score, like that of Credit Sesame, is from the credit reporting agency Experian, but they use their VantageScore. (their site)

WisePiggy

WisePiggy is a new website offering scores without the need of a credit card. They remain much smaller than the others mentioned above. They provide the TransUnion VantageScore FAKO score to their members. (their site)

Discover Credit Card

Discover credit card holders now receive their FICO credit score (the TransUnion 08 Bankcard Enhanced version which is the one a credit card company would see) with each of their credit card statements at no charge. There is a debate as to whether or not a FICO score is better than a FAKO score since there are nearly 50 different FICO score versions, but Discover credit cards do offer a true FICO score while the other services don’t.

It’s important to note that in order to get any of these free scores, you will have to give the company your social security number and other sensitive financial information. There is always a risk that these companies don’t keep the information secure.