Everything You Need to Know About Credit Karma
Are you wondering what Credit Karma Does and how it works? Your credit score can immensely impact your life if you do not keep track of how well it’s doing, so you can make changes to your finances if you need to.
If you’re planning on getting a mortgage shortly for your first home purchase, then having an excellent credit score is going to do the world of good for you.
With this in mind, keeping track of your credit score should be at the top of your priority list. If you have marginal credit, there is a lot you can do to raise your score quickly. This is where Credit Karma comes in to help by providing you with sound and free financial advice.
But how can you do that with little to no effort? Easy, you just need to sign up for an account and login at Credit Karma. You will then be able to log in to the site as often as you like and follow their credit improvement advice. Over time your credit scores will continue to improve if you follow their advice.
Why is it Important to Keep up With Your Credit Score?
As mentioned, a good credit score will be important to you if you’re looking at getting a mortgage or any other financial loan since you will have a much easier time obtaining one. Not to mention that things like interest rates will be a lot lower, thanks to your great credit score. Paying a loan back will be much more manageable for you when you have the best terms.
Having bad credit doesn’t mean you CAN’T obtain a loan, but it will certainly make things a lot difficult for you.
Even if you manage to secure finances, you will be paying much higher rates, which could cause unnecessary financial stress. You will want to strive to be at the higher end of credit scoring ranges.
With this in mind, it’s obviously going to be a good idea for you to keep an eye on your credit score with an app like Credit Karma so you can always be in the know when it comes to your own financial situation.
Meaning there will be no surprises when you visit a lender to get a loan for a house or other significant purchase.
Accidents Can Happen With Your Credit
Actions can and will affect your credit score, but sometimes errors in the system can negatively impact your own credit score. If you’re monitoring your credit score constantly, then you can get on top of these errors as soon as possible and go about removing them, so they don’t affect you and your finances in the future.
If such mistakes go unnoticed for too long, it will be much more difficult to get them removed. Let’s take a look at how Credit Karma can help with all of this.
What is Credit Karma?
Credit Karma offers two main services; it allows you to monitor your credit score (as discussed) and provides you with the opportunity to obtain a high yield savings account.
Let’s talk about these two main factors now…
Free Credit Score Monitoring
When using Credit Karma, after signing up for your free account, you will be able to check your credit score for free as much as you want to. Their finance improvement recommendations are what make them such a useful financial tool.
As you’d expect, their app is straightforward to use, so there will be no stress each time you go to check your credit score.
The other main offer that Credit Karma gives you is the free savings account, which you can use to help hit your financial goals much more efficiently.
The account offers you a way to save money whilst being rewarded for doing so, and as of early 2020, the APY for the savings account is just under 2% which makes it one of the most highly competitive rates within the current market. You will get plenty of great features and advantages from using their savings account, such as having to pay no fees or even having to keep a minimum balance within the account to reap its benefits.
Although this is a great part of Credit Karma, we want to primarily focus on the credit monitoring system they have, which is exactly what you’re here for. With this being said, the savings account they offer is still something worth looking into if you plan on using this service right after reading the rest of this article.
How Does Credit Karma Work?
After you sign up for your free Credit Karma account, you will be prompted to give an assortment of individual data. Although this will only take a few minutes, it would be wise to have personal details on hand so you can sign up as quickly as possible so that you can check out your own credit score sooner.
There will be some information you might have to dig for, such as your social security number, which might not be readily available as your home address would be, so just make sure you have everything handy.
When Credit Karma has your data, they will find your credit reports from both TransUnion and Equifax.
With this data collected, the organization will be able to provide your credit score for free.
You can check this score out whenever you feel the need to, although you don’t need to do this too often if you want to stay on top of your credit score since Credit Karma will send you notifications for free if any major changes were to happen.
Is Credit Karma Free (and How)?
There’s always a catch, isn’t there? You’re probably thinking to yourself; this sounds too good to be free!
Well, believe us when we say, Credit Karma is, in fact, free! Though, of course, they do make money, just not directly from charging you something like a subscription.
They do their business by recommending credit products like credit cards and personal loans to you based on the credit score. So they help make sure you have as good of a score as possible while recommending the products you will be likely accepted for based on your overall score.
Credit Karma will make a commission on whatever product you choose.
Just How Accurate Is Credit Karma?
Credit Karma can provide you with an accurate representation of your credit score, although there are some limitations you should be aware of before you sign up for a free account.
People ask all the time if Credit Karma credit scoring is accurate. The information provided is accurate. It is not the same as your FICO score, however. It would be best to keep this in mind when applying for a mortgage to buy a home.
As you seek out loans so you can purchase your dream home, you might notice that your Credit Karma score and the one your lenders look at are completely different from one another.
Credit Karma uses the Vantage 3.0 model, which is a model only used by about 10% of lenders. Obviously, you might run into some discrepancies if you got to a lender using the FICO scoring model.
Though we’d say you should be too worried about this since if you have a high credit score on Credit Karma, you’re likely going to have a high score on the FICO model too. However, if you have a borderline credit score, where you BARELY meet the requirements for a particular loan, then you could run into some difficulties getting the finances you need.
Essentially, the way around this is just to make sure you have a credit score as high as you possibly can before you even consider going to a lender.
Doing so is going to be in your best interests anyway.
Credit Karma Only Factors Info From Two Credit Bureaus
The three major bureaus, Equifax, Transunion, and Experian, each of them has your credit report on file so they can track your credit history. Although, Credit Karma only factors two of these 3 credit reports into your final credit score.
They only use Equifax and Transunion to determine your score, which could be a problem since leaving out one of the major bureaus could possibly make your score much less accurate than it actually is.
Your Score Will Not Be Updated Immediately
Whether you’re paying back a loan, or you’ve just got your phone bill coming out of your bank account every month, all of these things can and will affect your credit score.
The only issue is, this all needs to be reported to the major bureaus first before Credit Karma can access the new information and give you an updated and accurate credit score to be displayed in your account.
Though, this isn’t really an issue with Credit Karma.
All credit score organizations like this one will have this advantage associated with them since this is just how things work within the industry, so nothing much can be done here, even if you go elsewhere.
Is Credit Karma safe to use?
With all this being said, we want to answer one final concern that no doubt you have right now, and that’s the fact of whether or not a service like Credit Karma is going to be safe to use.
Based on the data accessible, Credit Karma is definitely safe to use if you want to keep up with your credit score. The organization is by no means a trick to take your data or charge unauthorized funds to your credit card.
But if you don’t want to believe us, you should check out the thousands of positive reviews online that have been left by their user base.
At the end of the day, Credit Karma is one of the safest and most trustworthy organizations in the business; if you’re serious about staying up to date with your credit score, you should definitely go ahead and sign up with them.