credit karma

Credit Karma: Legit or Not?

Ever since they first offered their services to the public in 2007, Credit Karma has made a name for itself as a reliable and mostly free credit reporting and assistance agency. And given the fact that the service has over 100 million members in the US and Canada alone and more than 3 million people in the UK, you would think that subscribing to them would not be a bad idea at all.

But, as with all other credit reporting agencies, you have to be doubly sure. Is Credit Karma really the reliable service that it promotes itself to be? Would you trust what it has to say to you about your standing with creditors?

The answer is up to you but it is certain that you can make a decision whether to trust Credit Karma’s report for your personal finances at the end of this article.

What is Credit Karma?

The agency primarily promotes itself as a credit assistance agency. This means that Credit Karma offers a wide selection of tools and features for its members which include the following:

  1. Member Reviews

Credit Karma gives personal reviews to each of its members. How it does this is that the company analyses more than 5 million credit cards each month and then compares these to how each member behaves finance-wise.

Through these reviews, a member can get insight on their financial activities as well as others. They will be given recommendations to which credit card is best for them, compare terms and services, and even add reviews for these cards themselves.

Think of it as peer-level credit advice without having to directly interact with another member or Customer Service.

  • Personal Loan Offers

This option is offered towards those that want to simplify and consolidate their debts. The company lists a number of loans that you could take based on your current credit report score. In each recommendation, you will be given details like the APR, the terms of payment, and the estimated loan amount.

Also, each of these loan offers will have reviews made by those that have taken them in the past.

  • Car Loan Offers

Your credit score will affect a lot of your transactions, even the ones that don’t involve credit per se. Getting a car loan these days can be hard if your credit score is not that trustworthy.

This feature matches you with the loans that you qualify the most based on your score. The company also provides advice on how you should manage such loans while other Credit Karma members can leave reviews as reference for would-be applicants.

  • Community Interaction

Credit Karma allows members to interact with each other through forums and discussion threads. You can create one thread on your own or join in an active discussion. What is certain is that other members will chime in and help others get the hang of the system or their own finances.

  • Credit Scores

Credit Karma gives you access to credit scores from Equifax and TransUnion.  Provided that there is new information streaming in about your credit activities, you might notice that your score will fluctuate to reflect the new data every week.

The scores that you can view at Credit Karma’s site are calculated using the FICO system and are comprised by various elements which include the following.

  • Total debt
  • Payment history
  • Type of credit cards and accounts
  • Length of credit history
  • Presence of newly opened credit scores.

And just as with other reporting agencies, your FICO score will range from 300 (Very Poor) to 850 (Exceptional).

  • Credit Report

Aside from their credit scores, members of Credit Karma can get a hold of a copy of their credit reports on a weekly basis. And the best part is that all of these reports are free and updated as soon as new information about your activities are submitted by creditors.

Credit Karma is affiliated with Equifax although it has been working with TransUnion closer in the last few years. In 2018, the company acquired Noddle, a TransUnion-owned credit reporting service with 4 million active users.

It’s roughly the same deal that Experian had with ClearScore in the same year where the larger reporting companies would give some of their assets to smaller ones like Credit Karma to consolidate both of their customer bases.

What this means is that Credit Karma’s report will follow mostly the same scoring system used by TransUnion than the other two major reporting agencies.

However, there’s a caveat: these credit reports are not always accurate. There might be that freak occurrence when a favorable item in your credit history would not be reflected in the final score. This might happen for a number of reasons, the lender not immediately reporting the data being one of them. In some cases, it is a purely technical error in the program.

Another downside is that Credit Karma’s report is not as comprehensive as you would want it to be. It gives you a mere overview of your score with a short summary explaining how your scores were calculated. If you were to rely on Credit Karma’s reports alone, you could not make the proper adjustments to your financial activities.

If you do think that there are discrepancies in your report, Credit Karma gives you the option to contest it. If the report is indeed true, amendments will be done and a digital copy of the amended report will be published as soon as possible.

One other feature included here is Credit Monitoring. When there is a notable change in your report data, Credit Karma will send you a credit alert.

  • Tools

Learning about your current standing with creditors is well and good but you would also benefit from assistance in improving it for future transactions. This is where Credit Karma’s two Credit tools come in.

  • The Simulator

What if you open a new credit line now? What if you clear off this debt before the next report? The simulator helps you predict what might happen to your score if you perform certain acts.

  • Calculators

Credit Karma offers four calculators for Home Affordability, Debt Repayment, Simple Loans, and Amortization. Just do take note, however, that these calculators take your most recent score and credit history into account. As such, most of the numbers generated here are mere estimations, not actual rates and figures.

Is it Safe to Use?

Now for the most important question:

With all these features and services, is Credit Karma reliable and safe? The short answer is yes.

The company has placed several countermeasures to protect you and your data from prying, unauthorised eyes. They include the following:

  1. The site has a DigiCert EV SSL Certificate. This means that the site uses the highest possible form of data authentication.
  • If the data were to be compromised, it will be hidden beneath several layers of encryption so your data would not be usable. They also ask only the 4 digits of your Social Security Number which is not enough for a possible breach.
  • The site is read-only by default. It cannot be altered by anyone that is not an administrator.
  • The servers of the company are protected by several firewalls and the privacy policy used on the site is TRUSTe certified.

If it is Free, How Do they Pay Themselves?

This is a completely legitimate question. If the credit reports and ancillary services provided by Credit Karma are free, then how did they stay afloat for well over a decade already?

The answer is in their business model which is heavily dependent on affiliates. Remember those recommendations for loans and credit cards offered in their services?

All of those companies are affiliated with the agency. If one member decides to apply for a card or loan from any of these affiliates, a portion of the application fee that that company gets from you will be sent back to the agency.

In essence, these companies are advertising their services through the agency and Credit Karma gets a portion of the ad revenue back for every successful click-though and application. And given the fact that there are more than 100 million active members now, it is certain that Credit Karma could manage to pay its staff for the next few years.

Other Points of Concern

Like any other website, Credit Karma needs the occasional downtime for routine maintenance runs. If they do need to fix something in the website, you cannot access even a single tool or service that they offer.

Fortunately, the maintenance runs do not last for longer than a day. And rarely does the company shut down their site’s services temporarily without making an announcement first.

As for user ratings, Credit Karma enjoys a 2.5 star general rating at TrustPilot UK. There are some users who find no issues with their interactions with the company. However, a considerable portion do report infrequent updates, erroneous credit reports, and ineffective credit advice. Main bug bear seems to be around not having uptodate electoral roll information.

For positive reviews, the general consensus is that Credit Karma’s other services like the ability to monitor changes in your report and the peer-to-peer interactions with members are the upsides to their experience with the company.

Judging from what they are doing in the US where they are now offering to file people’s taxes it seems Credit Karma is quite a progressive company. With the takeover of Noddle in the UK it seems that it might be best to pick and choose the various services they now offer. For credit score and reports looks like that works. For getting a personal loan one should maybe allow some time for these newer services to bed in while Credit Karma finetune their backend processes.

In Conclusion

For credit reporting, Credit Karma is rather average as a service. It only offers scores and reports from 2 of the 3 major agencies without providing further insight as to how each data is treated differently from one agency or scoring system to another.

If there was any aspect that Credit Karma excels at, however, it would be in giving the sense that you are part of a community. Credit holders subscribed to the service can not only receive up to date reports but also assistance in improving their financial standing with creditors. Whether through the tools and services provided or even the personal insights from other members, you can be certain that help will always come to you in Credit Karma. Provided that you ask for it, of course.