Credit Karma is a credit services company based in San Francisco, California, that offers free credit reporting and monitoring services. This is one of the few companies that actually provides free credit reporting and monitoring services, instead of just using wild claims to bait customers. The business, which started in 2007, is structured as a corporation and has over 20 employees. Credit Karma has a C+ rating with the BBB. Its rating has recently been downgraded due to a rise in complaints and a settlement with the FTC over security issues with its mobile app.
Credit Karma offers customers free access to their TransUnion and Equifax credit reports and VantageScores, and sends them alerts whenever their scores or reports change. It also allows users to link their credit card and bank accounts to track their spending. The website includes a large database of credit-related articles and provides free access to useful credit tools, such as credit score simulators, home affordability calculators and debt repayment calculators.
However, Credit Karma does not include your FICO score: the score used by most lenders. The VantageScore 3.0, which it does offer, was developed by the three major credit bureaus: Equifax, TransUnion and Experian, as a competitor to FICO with the purpose of providing more consistent scores. The algorithms of FICO and VantageScore 3.0 often produce similar results but there are differences in how they calculate scores. VantageScore 3.0, for instance, does not take into consideration collection accounts that have been reported as paid in full, which gives people who are trying to turn a new page after past mistakes a break.
Customers must open an account with Credit Karma to receive their credit reports and scores. The registration process requires them to provide personal information such as name, date of birth and Social Security Number. This is to confirm the identity of customers before disclosing private financial information. If a person doesn't have enough information on their credit history to confirm their identity online, they may have to wait for their password to come by mail.
Credit Karma makes money from advertising and commissions on the products it offers its clients. Because Credit Karma has such an intimate knowledge of its customers finances and credit, it can predict which credit cards, loans and insurance products they are likely to be interested in and for which they may be eligible.
Credit Karma is truly free. You do have to “endure” regular recommendations of credit cards and loan products; but there is not out-of-pocket cost for constant access to your credit reports and VantageScores: a service that would easily cost $15 a month with other companies.
Credit Karma provides a truly free way of monitoring your credit reports and scores. The website is full of useful information and insight on your credit situation and clearly explains how you can improve your credit. Even the ads—I mean recommendations— for credit cards and loans are worth considering as they are targeted to each customer's credit score and financial circumstances.