Credit Karma is no scam
If you are looking for free credit scores, look no further. Free credit reports have been around for some time. You can get three reports a year by going to Annual Credit Report. Be very careful not to go to other sites, because they usually trick you into signing up for something that you possibly don't want. One such example is FreeCreditReport.com, which runs commercials on television. They sign you up for credit monitoring that costs $14.95 if you don't cancel within a 7-day free trial (I'll show you later how to get free credit monitoring). The Digerati Life has more information on credit reports.
Credit Reports vs. Credit Scores
When I was first learning about credit, I thought a credit report and a credit score was the same thing. In fact, I never thought twice about either one until I bought a house. I only knew that paying my bills on time would pay dividends down the road. (I was right it did.)
- Credit Reports - This is the information on how much and what type of credit you have, your payment history, etc.
- Credit Scores - This is a number that attempts to reflect the credit risk by using the information in your credit report.
For those familiar with sports and the processing of drafting a player, there's an easy parallel. A credit report is analogous all the information your scouts have gathered about the player. This can include how strong he is, how fast he is, his hand-eye coordination, etc. A credit score analogous to what a team does with that information to decide what makes one player better than another come draft day. The Colts and the Patriots might have similar reports on a player, but their scores (how they value the reports) will differ.
Get Your Free Credit Scores with Credit Karma
Most people that have gotten credit scores have gotten a FICO score from the Fair Isaac Corporation. This is simply their interpretation of what's in your credit report. The credit bureaus have their own credit scores as well including Experian's PLUS, Equifax's ScorePower, and TransUnion's credit score. As far as I can tell, it's very hard to get access to these scores for free, with no strings attached. The exception is Credit Karma. You sign up and you get your credit store for free (you can see mine below).
There might be a small string attached to Credit Karma. You need to surrender your social security number to them. It's a necessary piece of information required to get your credit report which is needed to determine your credit score. Some people guard their social security numbers with their lives. In that case, perhaps you are better off paying for your credit scores. I'm feel secure in knowing that Credit Karma is putting a great effort behind security and privacy - their entire business relies on it.
Using Credit Karma
I thought I'd write something long and drawn about using Credit Karma. But it really is simple. You sign up and they give you Dashboard that shows your Credit Karma credit score. You can get an update of your credit score any time you want. However, I really like the Credit Compare page. It gives me a view on how I rank vs. the rest of the United States.
Credit Karma Score Reliability
As you can see from my credit ratings below, I have no issues with Credit Karma's score. It seems to substantiate the teaser mortgage rate that I qualified for 4 years ago. Since I only have my own credit to test, I can only say that it seems very accurate for myself. If anyone else has experience I'd like to hear your story in the comments.
Leadership at Credit Karma
I had a chance to talk with CEO Kenneth Lin at Finovate, a conference for financial start-ups. Unlike real a journalist, I didn't take notes. If I had a pressing set of questions, I may have, but I just I didn't have the time to test out the system then. Plus, as Lazy as I am, I'd rather sit and talk with a guy for a few minutes. Usually by that time I can make my decision as to whether the person is full of bovine excrement. I have to say that Mr. Lin passed the test, not a hint of bovine excrement around.
Final Thoughts on Credit Karma
One of the key questions I ask is, how is this company going to make money? As best I can tell, their model seems to be similar to Mint's... show you offers from advertisers and collect a commission on them.
Another question I ask is, how does this change the marketplace? I think it has potential to be a huge changer for the big credit bureaus. It reminds of when Zecco came out with free stock trades. In my eyes, E*Trade and Ameritrade have to innovate to show that they bring more value for the dollar. I'm not convinced they've done that. In the same way, Credit Karma should force the big credit bureaus to give consumers more value for the dollar spent on a credit score. If they can't adapt Credit Karma will start slowly eating their lunch. In both cases (Zecco and Credit Karma), consumers stand to win big.
So get out there start improving your credit score. Sign up for Credit Karma today!
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