Credit Karma is a free online service that allows consumers to check their credit score for free. Checking your credit on Credit Karma does not hurt your credit score because it’s a self-initiated, soft credit inquiry. Members can check their credit scores as often as they wish.
Key Takeaways
- Credit Karma allows you to check your credit report and score for free, without affecting your score.
- The service doesn’t hurt your credit score because it counts as a self-initiated inquiry, which is a soft credit inquiry.
- Several hard inquiries over a short period can drop a credit score as much as five points per inquiry.
- Credit Karma’s service is free. It makes money when users sign up for loans and credit cards advertised on its website.
How Credit Karma Works
The three nationwide credit-reporting agencies, Equifax, Transunion, and Experian, each allow users to access one free credit report annually through AnnualCreditReport.com. Credit Karma provides free weekly updated credit reports and free VantageScore 3.0(r) credit scores from Equifax and TransUnion.
Experian offers a free annual credit report and free FICO score directly from its website.
Credit Karma makes money when users sign up for credit cards or loans that it offers on its website.Credit Karma provides leads to lenders that advertise with it. It also discloses how it makes money and the information it gathers on its website.
Credit Karma offers services to help you manage debt, keep track of your credit, organize your budget, among others. It can help you dispute errors on your credit reports, reduce high interest, and help you pace your mortgage. It can also help you calculate how long it would take to pay off your credit card debt, and determine interest rates and terms for different loans.
Intuit, the maker of TurboTax and other tax software products, bought Credit Karma for $8.1 billion in December 2020.
Why Credit Karma Won't Hurt Your Score
Credit Karma checks your FICO score on your behalf and therefore conducts soft inquiries. Soft inquiries differ from hard inquiries in that they do not affect your credit score. In contrast, multiple hard inquiries in a short period of time can reduce your score by much as five points per inquiry and can stay on your report for up to two years.
Credit bureaus tend to deduct points, particularly if you have a short credit history or only a few accounts. Credit bureaus interpret multiple hard inquiries as indicating that you may be a high-risk borrower.
People with multiple hard inquiries are eight times more likely to declare bankruptcy than other people with no bankruptcies on their reports.
Hard Inquiries vs. Soft Inquiries
Hard inquiries occur when you apply for a mortgage, auto, student, business, or personal loan, or for a credit card. They also occur when you request a credit limit increase. While one or two hard inquiries a year may hardly dent credit scores, six or more hard inquiries at once can cause harm.
Soft inquiries, on the other hand, are generally credit checks made by businesses that offer goods or services, employer background checks, pre-approvals for credit card offers, and checking personal credit scores. Soft inquiries can also be inquiries made by businesses with which you already have accounts.
Most of these softer inquiries are not for official lending decisions. They’re considered promotional and conditional, and they won’t affect your credit score. Soft inquiries can be done without your permission and they may be reported on your credit report, depending on the credit bureau.
Other activities, such as applying to rent an apartment or car, getting a cable or internet account, having your identity verified by a financial institution, such as a credit union or stock brokerage, or opening a checking account may result in a hard or soft inquiry. This depends on the credit card bureau or type of institution that instigates the inquiry. Credit Karma requests the information on its member’s behalf, so it is considered a soft inquiry and does not lower your credit score.
How Accurate is Credit Karma?
Credit Karma is considered an accurate source of credit information because it gets its information from two of the three major credit bureaus: TransUnion and Equifax. So, if there is credit information reported to Experian, it will not be reflected in Credit Karma's data.
Is Credit Karma Legit and Safe?
Credit Karma is considered a legitimate company that provides credit score information that is the same or close to your FiCO score. Your lender may use a slightly different credit score to assess you as a borrower, such as Experian data.
How Does Credit Karma Make Money?
Credit Karma provides credit information for free to users. It makes money when users sign up for loans and credit cards advertised on its website.
The Bottom Line
Credit Karma, in line with similar organizations such as Credit Sesame and MyFICO, advertises easy-to-read credit reports, personalized score insights, and free credit monitoring that help members spot potential identity theft, among other options. You can use this service, as well as your free credit annual credit report from AnnualCreditReport.com, to monitor your credit history.
