Earlier we discussed how I first found out about Credit Karma and how, as a seasoned financial professional, I was inclined to think that Credit Karma is a scam offer for free credit scores. I decided to do a review after seeing some Credit Karma reviews that don’t really answer my questions (or the questions others seem to be asking.)
Update: Read here about an opt-in service Credit Karma review credit monitoring as a free additional service.
Before we get started, there is one very important thing to be aware of. There are scam websites out there that take advantage of people thinking they are going to CreditKarma.com. Remember, Credit is with a ‘c’ and Karma is with a ‘k’. If you somehow end up on either KreditKarma or CreditCarma chances are you are in for a scam. If you get asked to enter a credit card number, be sure you are on the right website first. Second, this review is only about CreditKarma’s free credit score service. This is NOT the only service that Credit Karma offers. They also offer other services. Credit Karma’s not free services will require you to enter a credit card number. If this happens, you are signing up for an additional service, and there will very likely be charges. In this review of Credit Karma, we are only talking about the free credit score service, not the add-on services.
There are multiple reasons for thinking Credit Karma’s service is not legitimate, but the main one is that credit scores are not free.
Credit scores are not free for you, they are not free for banks, they are not free for car dealers, they are not free for anyone. Credit scores are the “why didn’t I think of that” invention of the century where personal lending is concerned.
A company called Fair Isaacs takes information from the credit reports at any of the three major credit bureaus and then uses a proprietary algorithm to reduce dozens of pages or more into one single number called a credit score. It does not do this for free. Every time someone pulls your credit score, they pay. They may pay a lot or they may pay a little depending upon their agreement with Fair Issac, but they do pay. You can’t give something that costs you money for free unless you have another way to make more money than you are paying out.
Credit Karma Reviews of Free Credit Score
Since most free credit score scams are actually free trial offers that lead to an automatic recurring charge on your credit card, I figured that Credit Karma would want a credit card number before giving me my credit score. I know how to beat automatic charges on my credit cards, so I thought I would go through the process anyway and find out for sure whether or not Credit Karma was a scam.
The surprising thing was that they never asked me to enter a credit card number!
As you may recall, I had generated a limited use credit card number to enter, but I didn’t need it. Credit Karma asked for a lot of personal information, but never asked me to enter a credit card number nor any bank account information. In other words, they have no way to charge me for my credit score. It’s tough to scam someone when you don’t get any money from them.
That begs the question, is the credit score from Credit-Karma a real credit score?
Well, that sort of depends on what you mean by “real”.
You see, Credit Karma scores are real Vantage 3.0 credit scores. The catch is that Vantage credit scores are not used by most lenders or financial institutions. In other words, the scores is accurate, but it is not the score that most financial institutions will be using when you apply for credit. Most banks and lenders use FICO scores, not Vantage scores.
Another credit score offering out there are calculators that “estimate” your credit score for you. The catch is that they estimate your credit score based upon the information that you provide. Chances are that there is no way you are going to enter all of the information that exists in your credit report, so it is not a very accurate estimate, no matter how good the credit score calculator program itself is. So, these CreditKarma scores are better than those kind of estimators.
With CreditKarma.com instead of asking me for my financial account information, they asked me for the same type of personal information anyone would need to pull a credit report and get a credit score on me. This does include your social security number and there is no way around that, so at a certain level, you have to trust that the Credit Karma website is legit.
Basically, like all online financial services it is safe, until it is not. That is, they use secure connections and encryption, and all that, but a determined hacker, or stupid employee can ruin it all. Unfortunately, this is true of any bank, credit card, or retailer out there. (See also: Home Depot hack, IRS fraud, identity theft… you get the idea.)
Credit Karma Complaints
The number one CreditKarma complaint is that the credit score is not a real FICO score. It is a Vantage 3.0 credit score. However, it is based upon your actual credit report data, so it is good for monitoring whether your score is going up or down, even if it is not perfect for knowing what your FICO score number is right this second.
See this for more information about real credit scores versus fake credit scores.
Now what would make Credit Karma the must have personal finance service for financially savvy people is that it does not just offer you your credit score for free once, but says that you can come back and update it as often as you like. I don’t know if there is a limit on how many times you can update, but I updated my free credit score from Credit Karma every month since May with no complaints.
In other words, I have gotten six free credit scores from CreditKarma.com without paying a cent, without buying anything, and without clicking on any advertisements. There are advertisements on the page, but unless they are the kind that pay just for showing up, they have earned nothing from me other than thanks and this review.
I recently setup an account for my wife (spouses can have very different credit scores even if “everything” is held jointly) and have started getting her free credit score as well.
No matter how it turns out down the road, for now, Credit Karma is a great deal for people managing their money.