The Complete Guide to Credit Karma

March 03rd, 2021

The Complete Guide to Credit Karma

The Complete Guide to Credit Karma

What is Credit Karma?How accurate is Credit Karma? How often does Credit Karma update?

These are the questions peoplewant answers to when it comes to Credit Karma and figuring out their credit score.When you have to hand over personal information, you want to be sure that the company is safe, reliable and something you want to use. Let's dive in and find out ifCreditKarma is for you:

Credit Karma - 15 Things BEFORE You Sign Up for Credit Karma

1. What is Credit Karma?

Credit Karma is a personal finance company that provides information on your credit score, report, and insights on how to improve. You can keep tabs on your credit scores from two of the major bureaus, TransUnion and Equifax.You canalso take advantage ofadvice and tools on the site to get your finances in better shape.

Your credit score is a critical piece of informationas it relates to your ability to qualify for a mortgage and buy a home. Keeping up to date on your credit score is important for everyone and with Credit Karma, you're constantly notified of where your score stands.

For instance, Credit Karma can send you a notification to your phone if your credit score changes one way or another. Additionally, the Credit Karmasoftware will provide tips that can help youimprove your score. Credit Karma's credit checker ensures that you're always aware of where your credithealth stands.

2. How Does Credit Karma Work?

The gist of Credit Karma is simple. You provideyourinformation and in return Credit Karma provides a free credit monitoring service. The Credit Karma software will deliver to you your credit score and credit report while offering tips and advice on ways to improve your credit score.

Credit Karma uses VantageScore 3.0 to determine scores. VantageScore 3.0 is one of many credit scoring models available today. It is different than the well-known FICO model— but both are considered reputable models.

The VantageScore 3.0 model takes your payment history, financial balances, and credit history into account. If you have a history of making on-time payments, that bodes wellfor you.When it comes to determining scores, payment history is most important.

Use Credit Karma to obtain your Credit Score and Credit Report Information

3. How Does Credit Karma Make Money?

Credit Karma remains a free service by serving up ads to their users who may benefit from the offerings. These advertisers pay Credit Karma to market their service to Credit Karma users. It's a win-win for everyone involved.

When you need a service related to yourcredit score or credit report it's natural to begin to look for options. Credit Karma displays those options to you within their software so that you don't have to go far to sign up for them. These services that Credit Karma displays in the form of advertisements may charge an additional fee to the Credit Karma user. The advertisers pay Credit Karma the fee to try and get out in front of the people who need their service.

They say timing is everything and that's what makes it so perfect for everyone involved.So an example use case would be: whenthe useris using thefree credit monitoring service provided by Credit Karma they may alsofind themselves in need of a credit card to help them build more credit.This is what prompts people to click on the credit card advertisement and sign up for a new credit card.

Using this model, Credit Karma can give you a reliable credit report. You can use this to get a better sense of your credit health.

4. How to Get Startedand Use Credit Karma Services?

The Credit Karma sign-in page is easy to use.When you go to the website, you'll need to create an account first. Thistakes less than five minutes and it's five minutes well spent.

The Credit Karma site uses two-factor authentication to help keep you secure. Once you have an account set up, you can determine which tools and information you want to use. For example, you can opt for text alerts about tips or credit score changes.

TheCredit Karma website uses bold graphics and clear instructions to make finding your way around the platform simple.The wealth of information, tools, advice, and ease of use makesCredit Karma an easy choice for someone looking to improve their credit health.

The assortment of tools on Credit Karma's website is probably the biggest draw. If you're facing a big debt or poor credit score, you can see how certain changes will position you in the future.

The credit score simulator provides answers to hypothetical situations. It's one of the most useful tools on the Credit Karma site.

Wondering what happens to your credit score if you close out a credit card or get denied for a credit application? You can input the numbers and find out.

Wondering how going into foreclosure impacts your score? Or letting an account go past due? You can find out.

Using the credit score simulator, you'll be able to see how your score will change when you do positive things— like pay off student loan debt. If you're wondering if applying for a new credit card is a good idea, you can get the answer you need.

Credit Karma also features several calculators on its site. Learn how much you'll need to pay each month to chip away at certain loan amounts. Or set the amount you can afford to pay each month and see how long it will take to pay off a debt.

Credit Karma walks you through the rationale behind each tool. You'll learn that most of your first mortgage payments go toward the interest on the loan. You'll see how that shifts as you close in on paying off the loan.

Is Credit Karma Accurate?

5.How Accurate is Credit Karma?

Yes,Credit Karma is accurate. The company doesn't try to guess your credit score based on the information you provide. Instead, they use that information to get actual numbers from credit bureaus. Your credit score and report comedirectly from TransUnion and Equifax which are two of the three credit bureaus. Keep in mind these agencies can only update their information as fast as they receive it so it may take up to six weeks to seeany changes you've made.

Why is it important for Credit Karma to maintain accuracy? Because it builds trust with the user. This is what prompts them to go directly to the source. Credit Karma uses numbers from Equifax and TransUnion. Since these are two of the primarycredit bureaus, you can trust that Credit Karma is using reliable sources. One downside is that Credit Karma does not use information from Experian, too.

Credit Karma's inaccuracies come from the fact it only receives information from two of the three credit bureaus.

As a result, the scoring might be a little different from that of other services that use all three bureaus. Even so, Credit Karma will give you a number that is in the right ballpark.

Be aware that different lenders will have different ways of determining your credit score, anyway. Not everyone follows the same formula. This means that when you apply for a home loan with different organizations, each one might determine a different number for your credit score.

6.How Much Does Credit Karma Cost?

Credit Karma is free. You won't need to pay monthly service fees as you do with other services. Not only will you get credit scores from two of the top bureaus, but you'll also get tips and tools so you can get the loan you need.

You won't be asked to input credit card information later, either. You can access your credit whenever you need to. There's no limit to how often you can check.

Credit Karma features products and services on its site that may be helpful to you. It makes these determinations after producing your credit report. As an example, the site may suggest a credit card for you and link to its page.

You're under no obligation to sign up for the credit card or try a promoted product. But by promoting these products, Credit Karma can make money— and remain free.

While seeing some product promotion might be a little annoying, it's worth it. Because Credit Karma is strategic in its use of ads, it can offer its services without charging you anything!

7.How Often Does Credit Karma Update Scores?

Credit Karma updates every 7-days and the company claims it is able to update TransUnion credit scores every day. You'll be able to see these changes on the website or within the app. This isbeneficial to everyone, especiallyif you're working with a near-term goal of obtaining a loan to buy a home.

Your credit always is changing, no matter what you do. If you open a new line of credit or improve your bill payments, you'll see your credit scores go up. But even if you don't change your payment habits or open new lines of credit, the scores will still change.

As your lines of credit get older, this can have a positive impact. It will show that you have more established lines of credit. In the same way, your credit score can improve as a one-time delinquent payment fades into history.

Many lenders will provide new information to credit bureaus every month. Some do every week. So you may have to wait for a little whileto see significant changes to your score.

When you're lookingfor yourdream homein the suburbs, you need to know where you stand. Being able to check your credit score at any time can only help you reach the number you need.

How Often Does Credit Karma Update?

8.Does Credit Karma Keep My Information Safe?

Credit Karma needs to work with Equifax and TransUnion to get your credit scores. These are two of the main credit bureaus. Because of this, you'll need to input some personal information— but not too much.

You'll input your name, birthday, address, and the final four digits of your social security number. In rare cases, you may need to provide your entire social security number.

While Credit Karma can track inquiries into your personal information, it's smart to be your own watchdog. When you get a credit report, check it for inaccuracies in your payment history, incorrect balances, or accounts that you never created.

You can rest assured that Credit Karma won't be putting your personal data out there. In other words, third parties won't have access to it. The company makes a point of protecting your identity from all threats.

Additionally, Credit Karma uses the latest encryption and security. This keeps website hackers frombeing able to obtain your personal information.

9.What is the Benefit of Credit Karma?

One of the big perks of Credit Karma is its credit monitoring service. This is important because you'll want to know how to monitor, improve and use your credit score. Another surprising benefit is that it helps protect against identity theft.

Since you may need to move quickly to get approved for a home loan, you want to know that your credit score is stable. With credit monitoring, Credit Karma will check records online to see if anyone has breached your personal data.

The last thing you want to deal with isidentity theft. Identity theft happens when someone takes your social security number. They may try to open bank accounts or make purchases in your name.

By monitoring your credit, you can catch breaches before they snowball into bigger issues. A better credit report means that lenders may offer better interest rates on loans and lower fees. Similarly, you can keep your insurance premiums lower if you have a strong credit score.

10. How Often Can You Check Your Credit Score?

Are you wondering if checking your credit score too often is bad? The good news is that youdon'tneed to worry about this with Credit Karma. You can check often— and for free— without causing disruption to your score.

Credit Karma encourages its users to check their credit score whenever they would like. When you start to build credit, that can motivate you to keep going in the right direction.

So if you're hoping to move forward with a home loan for anew house, don't worry. You won't hurt your credit score by checking it in the weeks leading up to the loan application. You're making soft inquiries when you use Credit Karma — and these are safe.

Soft inquiries are different from hard inquiries. With hard inquiries, a lender is checking your credit to determine if you get a loan. This may happen if you're trying to get approved for a house, car, apartment, or student loan.

Hard inquiries can hurt your credit score, at least a little bit. Having a lot of them could mean that you're getting turned down for a lot of loans due to bad credit. Soft inquiries tend to relate to background checks, and they won't hurt your credit score.

11.Credit Karmaand Personal Finances

Yes, Credit Karma can help you improve your personal finances and credit score by offering tips and advice within their platform that make it easy to understand how your score is calculated.

Credit Karma allows you to open a savings account through its website. You can link abank accountto it, too.

Credit Karma provides information on how to determine your income after taxes and track your spending habits. If you're new to the idea of budgeting, Credit Karma's articles and interface make it easy to get started.

On the website, Credit Karma suggests using a 50/30/20 budget rule. This strategy can help you categorize your spending. When you do this, you build awareness.

Thisapproach might not work for people with incomes on the very low or high end of the spectrum. Wealthier people might have more freedom to spend. Less wealthy people may not be able to save much.

This strategy can work for most people, though. The idea is that 50% of your income should go toward needs. Then 20% can cover debts while the remaining 30% can go toward things you want.

Theneedscategory may include groceries, rent payments, utilities, or health costs. This also can include the base payments you need to make on credit card bills each month.

At least 20% should be applied to savings. That 20% also can go toward paying off debt. Credit card payments or student loans are good debts to tackle.

The remaining 30%? You can use that on anything that youenjoy — like movie tickets, new clothing, or vacations. Of course, if you can put some of that toward saving, that's even better!

12. Get Your Credit Report Card

Credit Karma goes one step better than just giving you two credit numbers. It gives you a credit report card, too. It prepares the report card quickly and accurately.

In the report, you'll see a graph detailing how your credit score has evolved. If you're a visual person, this gives a good snapshot of your credit score history.

You'll also be able to see how other people in your demographic have faired with credit scores. You could find out that you're doing better than most in your age range or geographic location. But you might find out you need to step up your financial habits if you want to hold your own.

Credit Karma's report card helps you see what causes issues with your credit score. It might be that a pile of credit card debt is dragging you down, for example. You'll know where you're doing well, too.

After you get your report card, Credit Karma will make suggestions for how to move forward with improvements. Or you can find out how to move forward with things like auto or home loans.Some users would say that Credit Karma's additional servicesand the credit report card elevate it above the competition.

If you're in the market for a big purchase, like a house, Credit Karma is a great service to help you understand where you're at in terms of your credit score. Tracking your credit health will helpyou when it comes time to apply for a loan. Your credit score impacts the kind of home loan you'll get— and that impacts how much house you can afford.

How Credit Karma Helps You Monitor Your Credit Score to Buy Real Estate

13. Learn How to Read Your Credit Report

One of the best aspects of the Credit Karma website is its focus on education. If you're new to reading credit reports, you can get the low down on what the numbers mean. You'll understand that any score below 600 means you have some serious work to do!

Credit Karma is transparent about what goes into its scoring method. The site will guide you toward tackling your credit utilization or credit lines.

If you're spending nearly all of your available credit on a credit card, for instance, you'll see it. Since it's better to use a lower percentage of your available credit— under 30%— you can start doing that.

As another example, if you don't have many longstanding lines of credit, you'll need to develop some. This doesn't mean you should start opening a dozen new credit cards. Itdoesmean that you might want to hold on to the ones you have — or open a new one.

14. File Your Taxes with Credit Karma

Did you know that you can file your taxes with Credit Karma, too? You can file both your state and federal taxes for free. You can trust that Credit Karma will make sure they're accurate before filing.

Credit Karma states that you'll get the best refund possible. If another tax filing service provides a better return, Credit Karma even will pay the difference.

They emphasize that the process to file is easy on their site. In fact, you can snap a photo of your W-2, upload it, and you're on your way!Also, you cantransfer a previous year's returns from anotherpopular tax prep site to simplify the process.

If Credit Karma makes a mistake that causes a penalty, they offer a one thousand dollar back guarantee. While so many online tax filing siteshit you with fees, a free service like this one stands out.A lot like the rest of the Credit Karma website, it's easy to use!

15. Credit Karma Can Help with Your Real EstateGoals

The bottom line is that Credit Karma can help you enhance your creditscore before a big purchase whether it's a home, car, or any type of loan. A great credit score can oftentimes lead to a better interest rate which helps you afford more house while saving on the debts you'll accrue over time.

When you're hoping tobuy a home, you'll need to get approved for a loan. If you try to get preapproved or approved without knowing your score, you could be in for a scary surprise. With a bad score, you'll throw off your homebuying timeline.

You stand a better chance of getting a good offer from your lender if you have a good credit score. You can use a service like Credit Karma to monitor your score in the weeks leading up to a loan application.

Credit Karma allows you to check your score frequently so you can shore up your finances. Take care of delinquent bill payments or pay off a student loan. Taking these measures can set you up for a better offer from a lender!

There's no penalty for checking your score every few weeks. When your score looks good, you can head to the lender and prepare to get pre-approved for a loan.

Is Credit Karma For You?

Signing up for Credit Karma is a wise step for those that are preparing to use a mortgage to buy a house. Understanding your credit score is an absolute must before you approach a mortgage lender so you can receive the best interest rate on your loan. You also need to know where your credit score stands so you can plan your finances.With Credit Karma, you gain access to financial guidance so you can improve yourcredit score as you save up for a downpayment on your future home!

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Ryan Fitzgerald

Ryan Fitzgerald

Hi there! My name is Ryan Fitzgerald, and I am a REALTOR®. My goal is to help you learn more about real estate through our Real Estate Blog! Hopefully, you enjoyed the above blog post and it found a way to provide help or value to you. When you're ready to buy or sell a home of your own let us know here. Please feel free to join the conversation by dropping us a comment below.