Is Credit Karma A Good Free Tool To Use?

Is Credit Karma A Good Free Tool To Use?

Have you ever wondered what Credit Karma is and how it works? Maybe you have seen their advertisements on television? Are you wondering if Credit Karma is a good free tool to use?

Credit Karma is a free credit monitoring service that allows consumers to track their credit scores, learn about credit, and sign up for credit alerts.

Credit Karma does a great job of helping consumers learn about what impacts their credit scores. So how accurate can a free credit monitoring service like Credit Karma really be? Let’s take a look under the hood. Is it a good tool to utilize?

Improving Your Credit Score

Unlike so many companies in this industry, Credit Karma seems to be genuinely interested in helping its members improve their financial lives. It goes a lot further than just giving you access to your credit reports and credit scores.

The website also breaks down your credit report to show you where things have gone wrong, why, and how to fix those problems.

It will tell you how your credit score is calculated, what areas of your credit report are problematic, and give you recommendations on correcting issues and improving your credit steadily over time.

Their tools tell you how and where to apply such pressure, giving you actionable recommendations that will produce the results you desire if you stick with it.

How accurate is Credit Karma?

Credit Karma is an accurate way to check your Vantage credit score with TransUnion and Equifax. However, there are a few issues with this.

One issue is that most lenders utilize the FICO model and Credit Karma uses the VantageScore Model which means that the scoring system is different from most lenders. So it is not so much that Credit Karma is inaccurate; it is just that it utilizes a model that most lenders do not use.

The second issue is that Credit Karma does not provide you with an Experian score. Many lenders, including many credit card issuers, like to pull your credit score from Experian.

If your Experian credit report has different marks on it compared to your Equifax or TransUnion report, then there could be a large discrepancy between your Credit Karma score and what the credit card issuer sees.

Credit Karma Tools

As a Credit Karma member, you usually receive emails that keep you up to date on your credit and suggest personalized tips to improve your score. You can also see such tips on your credit report and score pages. However, it helps to know a few direct ways you can use this online service to boost your score and make the best use of the tools:

  • ​Use the credit score simulator​: This valuable tool shows your current score and allows you to simulate certain actions to see how your score would go up or down. If you have a high debt utilization ratio, you can try entering a large amount to pay off and see your score go up. If you’re considering a new loan, you can simulate the new inquiry, account, and balance and make sure that your credit doesn’t get harmed. Simulating the strong effect of late payments and collections can motivate you to pay your bills on time.
  • ​Keep an eye on your payments and balances​: Using Credit Karma’s credit report and score tools makes it easier to see how your balances look weekly as well as keep track of your payments. The service will let you know if a certain account is strongly impacting your score so that you can take action and reduce your debt.
  • ​Consider matched accounts with caution​: Your Credit Karma dashboard is filled with suggested accounts you could qualify for, and you’ll see menus on the top of the page with multiple credit card and loan categories. While you could find options with low-interest rates or desirable rewards, only apply for credit you absolutely need as the new account and inquiry will impact your score, along with the potential to get further into debt.
  • ​Check for credit report accuracy​: With two credit reports in hand, you can regularly investigate whether problems like incorrectly reported payments or fraudulent accounts appear. You can then take action with your creditors and the bureaus to prevent further harm.

Is Using Credit Karma a Good Idea?

Some people are put off using this service because of the information you need to provide. They will need information, including your social security number so that they can pinpoint you and your credit history. Without these details, you can’t see your financial history.

While providing a social security number to a lender will mean a hard inquiry on your credit report, this isn’t the case here. Since the service only gathers information and you aren’t trying to get a loan, using the service doesn’t harm your score.

There is a small downside to using the service, however. Since the service is free, you can expect to see some adverts for financial products. This helps to pay for the service provided, though it can be targeted towards your financial situation since they know a lot about you.

Our Final Thoughts

For those who want a simple way to keep up with their score and participate in credit monitoring, Credit Karma offers a free solution. The motivation from CK is great to get your credit score back to where it belongs. So do we recommend it? Yes, it’s a helpful tool that will help you reach your goals in the long run. The most important thing to keep in mind if you download the app is that it tracks credit scores using VantageScore 3.0, and the scores that your banks or lenders use may be different.