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Credit Karma is an online credit score service, that enables you to access your credit scores at any time. They've been around for a few years, and the service is advertised almost everywhere. But many people don't bother to sign up, assuming that it's too good to be true.
But is it? Let's take a look at the facts…
What is Credit Karma?
These days, there are many sources of free credit scores. But most of those sources will provide you with access to your score from only one of the three major credit repositories – Equifax, Experian or TransUnion. Credit Karma gives you access to credit scores from two of those repositories.
You are also legally entitled to get access to your credit report from each of the three repositories from a site known as AnnualCreditReport.com. However, that will entitle you to only an annual credit report, and not monthly updates. And that's exactly what you will get from Credit Karma.
How Does Credit Karma Work?
When you sign up for Credit Karma, you will have access to your credit scores from two of the three major credit bureaus, TransUnion and Equifax. These scores will both be available for presentation on your Credit Karma Dashboard page. The scores are updated every 30 days.
You can then click over to the “Score Details” page, which will provide you with the reasons why your credit scores are what they are. This will include six of the factors that are used to calculate your credit score, including their “impact”:
The factors are:
- Credit card use
- Payment history
- Derogatory marks
- Credit age
- Total accounts
- Hard inquiries (which are lenders actually pulling your credit report)
Under each category, you will also have the ability to see the details. This will include for example, credit card outstanding balances reported in your credit report, your actual loan payment history over the past several years, and a list of any derogatory information, including public records.
In a real way, the detailed information provided by Credit Karma includes most of the information that will be available on an actual credit report. They even provide suggestions on how to improve each category, including methods to dispute the information contained in your credit report.
Credit Karma Features
Credit Karma isn't just about credit scores – it's about everything that's related to them. The features that come with the platform provide assistance and tools that will help you in virtually everything in your life that has anything to do with credit.
My Recommendations. This feature provides you with lending suggestions based on your credit profile. Credit Karma will display one or more loan opportunities that you are likely to qualify for. These loans will enable you to consolidate your debts, so that you can save money on interest, or pay off your debts more quickly. The lender list will include not only the interest rate and terms, but also what Credit Karma believes will be the likelihood of loan approval.
Credit Card recommendations. Credit Karma will provide a list of credit cards that are available based on your credit profile. The cards can be displayed based on different categories, such as lowest interest rates, rewards, cash back, airlines or the best cards for balance transfers.
Loan recommendations. Once again based on your credit profile, Credit Karma will present lists of the best lenders available for personal loans, home loans, auto loans, student loans and business loans. There is also a dedicated auto loans page, that will give you access to the best lenders to either take a new auto loan with or refinance an existing one. They even present you with the best offers available for auto insurance.
Credit tools and calculators. Credit Karma has a large selection of tools to help you manage your credit. This includes tools to help you to improve your credit situation or to get out of debt. They also have calculators that enable you to determine in advance how a loan might help you. This includes their Mortgage Refinance Calculator, Debt Repayment Calculator, Simple Loan Calculator, and loan Amortization Calculator. The debt consolidation resource can help you to determine the benefits and drawbacks of credit counseling, bankruptcy or debt consolidation strategies.
Perhaps the most useful credit tool is the Credit Simulator. This tool enables you to determine what certain changes in your credit profile will do to your credit score. For example, you can determine how much a late payment will hurt your score, or how much paying down debt will improve it. This is a valuable tool for anyone who is looking to actively manage their credit scores.
Credit Karma Tax. The Credit Karma Tax service just started in January of this year. This is an interesting service and one that you would hardly expect to find on a credit score website. Just about anyone who signs up for the Credit Karma service can use the tax feature. It's available to individual income tax filers (not business or corporate), including those who file Schedule C for self-employment. You can also e-file for both federal and state income taxes.
There are some types of filers who can't use the service. Those include multiple state filings, part-year state filing, foreign earned income, state returns for married filing separately in community property states, or state filing without a federal filing.
Credit Karma Audit Defense. This is Credit Karma's service that will help you if you are audited by the IRS or state taxing authority. There are a few restrictions but this service was previously only offered to taxpayers who filed using Credit Karma Tax. You will have to give them access to your tax return but if you are eligible, you now have someone in your corner in case of an audit emergency.
How Much Does Credit Karma Cost?
The service is absolutely free to use! And yes, even the Tax service is completely free.
Does that sound like a gimmick?
It's actually nothing of the sort. Credit Karma openly advertises that they make their revenue on the lenders that they make available to you. If you agree to take a loan from one of those lenders, Credit Karma receives compensation from the lender. That means you pay nothing!
And not only does Credit Karma not charge a fee for their service, but they also pledge to never sell your information to marketers.
Is Credit Karma Safe?
Credit Karma is a completely safe. They provide you with your credit scores from TransUnion and Equifax on a monthly basis. And they never charge you a fee! That means that you have nothing to lose, and plenty to gain from taking advantage of the service.
Credit Karma can be especially beneficial for anyone who is looking to build or improve on their credit score. Not only does it provide you with ongoing access to your credit scores, but also to your credit report information. This gives you an opportunity to see if there are any errors in your credit profile that you may need to correct.
What's more, they provide you with the tools that you need to make those credit score improvements. They can tell you if you need to improve your credit history, lower the amount of outstanding debt that you have, or even consider your options to do a debt consolidation through a lower cost lender.
And since virtually everyone can experience credit difficulties at some point in life, having access to a service like Credit Karma will give you the tools that you need to deal with it when it happens.
Credit Karma is a service that's good for anyone to have, even if you're not particularly interested in tracking your credit score. Credit scores aside, when you're ready to borrow, Credit Karma will help you to find the lenders that will work best for your credit situation. And let's not forget about the free tax software and e-filing service.
Credit Karma packs too many resources in one free service to pass up.