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How does Credit Karma Work?

Credit Karma is a free credit monitoring service that provides users with access to their Vantage 300 credit scores and credit reports. 


In my opinion Credit Karma is awesome.


Here's how Credit Karma works

To sign up you will create an account and provide personal information, including your name, address, email, phone number, and the last four digits of your Social Security number.


Credit reporting

Credit Karma uses two of the three major credit bureaus, Equifax and TransUnion, to obtain users' credit reports. After you sign up they will update the credit reports every week.  If you check it more often CK will eventually update daily.


Credit scoring

Credit Karma uses the Vantage Score 3.0 credit score model, which is a credit scoring model developed by the three major credit bureaus. The score ranges from 300 to 850.  It is not the same as your FICO score but it will usually be close.


Credit monitoring

Credit Karma monitors your credit reports for changes, such as new account applications, late payments, or derogatory marks.

  

Soft Credit Check vs Hard Credit Check

You can check your score on Credit Karma every day and it will not affect your credit score.  A Credit Karma check is a Soft Credit Check. 


When you apply for a credit card, auto loan, or home mortgage you will cause a Hard Credit Check.  You will be required to sign a loan application with all of your information on it.  A hard credit check will have a small negative impact on your credit score, usually less than ten points. This will disappear in 2 years and have little effect after 6 months.


Significant Credit Changes


I use Credit Karma to notify me of significant credit score changes and also if a new loan application has shown up on my credit history.  Check out how I Monitor my Credit.


How Credit Karma Makes Money

Credit Karma makes money by referring you to lending, credit card or insurance companies. If you use a link from their site and apply for a credit card, a home loan or a personal loan they will earn a commission.  Also  if you go from their site with a link to an insurance company the insurance company will pay them a commission.


Credit Karma Advice

From my experience Credit Karma is usually giving you good advice. They have a lot of well written articles in their blog. They may  error on the side of a specific Advertiser a little bit, however most of their advice is attempting to help you.




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