Credit Karma: Review and Observations

Credit Karma is a website that offers users free credit scores and credit monitoring. View my Credit Karma reviews plus additional observations.

About Credit Karma

Credit Karma is a free online service that provides credit monitoring and credit scores to American consumers. The company was founded in 2008 by current CEO and co-founder Ken Lin. According to a March 2014 article in Forbes, Credit Karma designates each customer a report with a letter grade ranging from A to F. This grade is calculated from a 300-850 point scale, which is similar to the scale used in FICO credit scoring. The grade is ultimately estimated through a user’s debt repayment history as reported by TransUnion’s New Account Score, VantageScore, Auto Insurance Risk Score, and Home Insurance Risk Score.

In December of 2014, Credit Karma added a second score from Equifax to compare and improve their credit grade accuracy.

Some additional features available to Credit Karma users include the following:

• Daily email alerts that notify a user of changes in their credit report
• Ability to track bank accounts, credit cards, bills, mortgages, and loans
• Financial advice on how to improve credit and choose the best credit card
• A simulator which shows how certain financial actions influence your credit score

Below is a screenshot of creditkarma.com taken in July of 2014. The website appears to remain unchanged as of this January 2015 revision.

In March of 2014, The New York Post reported that nearly 21 million people maintained user accounts on Credit Karma, and the Forbes article linked above states that Credit Karma’s users were responsible for $1.2 trillion dollars of America’s approximated $13 trillion dollars of pending debt.

How Does Credit Karma Make Money?

Credit Karma generates income through financial advertisements displayed on their website. Although the company denies sharing user’s account information, the advertisements are custom directed based on financial profiling.

Credit Karma also profits through endorsement funding from other companies. Google Capital provided Credit Karma with a well-publicized $85 million dollars of funding in early 2014.

“Google Capital’s support – along with Tiger Global and our existing partners – is a public endorsement of how we’re helping consumers navigate the credit space… At the core of our company vision is the desire to change how people interact with their finances, making it easier and more transparent.” – CEO and co-founder Ken Lin

Credit Karma TV Commercial

Below is recent Credit Karma commercial, one of 19 that that have aired nationally:

Transcript of the television commercial above:

“So I remember my GPA from college. Uh, and I know my IQ.”

“Okay”

“Uh, and I know, uh… I know… I know what blood type I have.”

“Oh, wow…”

“Uh huh, yeah… I don’t know my credit score.”

“You don’t know your credit score?”

“I don’t know my credit score.”

“That’s really important. I mean…”

“I don’t know my credit score.”

“Don’t you want to buy a house? Like ever? You should probably check out Credit Karma. Its free.”

“Credit Karma? Free? That’s how much?”

“That’s how much its free.”

Credit Karma. Really free credit scores. No credit card needed.

Credit Karma Reviews

I have used Credit Karma for about a year and a half. Perhaps the most common question I am asked by those who are curious about the website is if the credit score given is accurate. It has been my experience that the score on Credit Karma is usually a pretty good indication of the true credit score – perhaps within about 40-50 points of the actual number. In my case, my actual credit score tends to be about 40 points higher than reported by Credit Karma. There are also alerts which are useful in spotting any changes to your credit. One aspect I do not like are the “recommendations” which are often for credit cards or legal advice. These feel more like ads than true recommendations, and I don’t feel they have enhanced the experience delivered by Credit Karma.

There are some features that I have opted not to use. For example, you can link up Credit Karma with your bank account for additional financial reports and information. I am not, however, comfortable in supplying this information due to possible security breaches.

The features I find most useful are the provided credit score – even if it’s not “official” – and the ability to see any recent negative activity affecting my credit.

Overall reviews around the internet give Credit Karma mixed user opinions, but reviews appear to be slightly weighted toward the positive side. Here are a list of pros and cons compiled from several user reviews and my own experience:

Pros

• Credit Karma is a free service.
• Many users find the Credit Karma website to be beneficial.
• The credit simulator seems to be a tool that many people find particularly useful.
• Good for seeing any changes to credit
• Some helpful tips for building a better credit score
• Unofficial credit score fairly accurate for determining general credit standing

Cons

• Credit scores provided by Credit Karma are not authentic FICO scores. They are supplied by Credit Karma as estimated scores based on existing fiscal statistics. I would argue, however, that it does give you a good general idea of where your score stands.
• To sign up for Credit Karma, users must input some personal information, including the last four digits of their social security number. Some users are concerned about possible privacy or security risks.
• Some users reported that they found the number of advertisements displayed on the Credit Karma website to be annoying. I have only found this to be the case when they come as a “recommendation.”
• A small number of users report getting additional spam mail after signing up for Credit Karma.
• Some of the recommendations feel more like advertisements.

Supplementary Information on Credit Karma

In addition to the pros and cons above, here is a list of credible websites with information on Credit Karma:

Federal Trade Commission (FTC) – In March of 2014, the FTC brought charges against Credit Karma due to the possibility of security breaches. Although Credit Karma guaranteed the protection of customer information, the company disabled SSL certificate validation for mobile apps, thus making the private information of it’s users vulnerable to interception. A settlement was reached in which Credit Karma must submit to security evaluations every two years for the next twenty years. FTC chairwoman Edith Ramirez commented on the case:

“Consumers are increasingly using mobile apps for sensitive transactions. Yet research suggests that many companies, like Fandango and Credit Karma, have failed to properly implement SSL encryption… Our cases against Fandango and Credit Karma should remind app developers of the need to make data security central to how they design their apps.”

Since March of 2013 the FTC has maintained a webpage devoted to protecting consumers on the subject of free credit reports. They state that the Fair Credit Reporting Act (FCRA) requires credit reporting companies (including TransUnion) to furnish a free credit report to requesting consumers. This can be done once a year, is authorized by federal law, and is a genuine credit report. These reports can be requested at annualcreditreport.com.

The Better Business Bureau (BBB) – Credit Karma is not a BBB accredited business, and the company currently has a grade of a B on a scale of A+ to F. Credit Karma’s BBB grade was apparently lowered to a B after the FTC took action against them.

AZcentral – This combined website for 12 News and The Arizona Republic offers a decent print review of Credit Karma. The FTC settlement is mentioned along with the spam email that may come along with signing up for the website. Nevertheless, they conclude that Credit Karma does offer a legitimate service.

Google Trends History

The Google Trends graph below shows interest in Credit Karma over time. Curiosity appears to have gradually increased over the last seven years, and interest in the website currently appears to be experiencing a peak surge.

Bottom Line

Credit Karma is a free website offering financial management assistance. Some users report that the tools offered by the website are beneficial, while others were concerned about spam emails and the possibility of privacy/security risks. In March of 2014, the FTC did bring charges against Credit Karma due to lapses in mobile app security. The FTC recommends that consumers obtain an annual credit report from annualcreditreport.com, a service that is available to the public through the Fair Credit Reporting Act and authorized by federal law.

I personally use Credit Karma regularly as a quick snapshot of where my credit score stands, and to monitor any changes on my credit report. Although the number generated by Credit Karma is not “official,” I have found it to be sufficient for my needs.

Your Credit Karma Reviews

Have you used Credit Karma? Give us your reviews in the comments below.

Updated January 10, 2015
Originally published July 2014