Are Credit Karma Scores Accurate and Useful

Real Estate Agent with RE/MAX Executive Realty 91362

What is Credit Karma?

Have you seen the advertisements on television for Credit Karma? Maybe, you have heard one of their radio ads? Without a doubt, Credit Karma does a great job of advertising their services. But do you know what they are all about? Lots of people wonder what Credit Karma is and how it works?

In a nutshell, Credit Karma gives you free access to get your credit score. Sign up on their site and provide some personal details to them. Credit Karma will provide you with your credit score in a matter of minutes, they don't ask for credit card details, and it won't hurt your score to check.

They also will provide you with your credit report as well. Best of all, Credit Karma provides you with critical information in order to put yourself in a better financial position. Something that makes a ton of sense, especially when your plan is to buy a home where credit scores influence your interest rates to such a large degree. Have a look at the reference from Maximum Real Estate Exposure, which provides an in-depth analysis of the site.

This seems like an excellent deal, so there must be some downsides, right? Let's take a look at the pros and cons of the services offered by Credit Karma to find out.

How Can Credit Karma Offer This for Free?

As they say, there's no such thing as a free lunch, and that is true here as well. While they will give you your credit score, they are a business and do make money from their website.

You will be shown targeted adverts, which allows advertisers to better spend their ad money. Since you provide a lot of information to the site, they can use this valuable data to sell more expensive advertising space.

This means you will get adverts based on your spending habits and does mean that you are more likely to make a purchase or loan application through these adverts. As long as you are aware of this situation and the site is open about this practice, which it is, it shouldn't be a problem.

Is the Credit Karma Score Accurate?

Despite them offering a free service, there is no benefit to them if the information they give is wrong. To provide you with your credit score, the website takes information from Equifax and TransUnion. Credit Karma scores use the VantageScore 3.0 model, which was created by the main credit bureaus.

This method of credit scoring was created in 2006 and is steadily increasing its use by financial companies. However, it isn't the industry-standard method used to check credit scores.

You may have seen credit scores given as a FICO score, VantageScore is similar following the same processes to assess financial stability. VantageScore is claimed to provide more accurate information by taking into account up to 2 years of credit history.

This is a transparent model that claims to give people a better grasp of their financial situation and how different actions change the score.

Things which are considered, include:

  • Payment history
  • Type of credit
  • How much of your credit limit you use
  • Debt levels
  • Length of time you've had credit
  • Inquiries on your credit report

The score you get using VantageScore is likely to be different from the FICO rating, however. VantageScore has the benefit of being able to assess people with not much credit history as well.

The Disadvantages of Using Credit Karma

There are three main credit bureaus, and Karma only uses two of them, this could mean that the result you get from them isn't as accurate as it could be. There may be some information which is recorded by the other bureau and not picked up by the two used. This could lead to misleading results.

Most lenders use the more established FICO score to assess applicants for credit. Since the Credit Karma scores are using the VantageScore system, you may find that the number you receive is quite a bit higher than the amount the lender is working with. This has been reported by some of their customers, though there are also reports that the difference is as little as 1 percent.

They only update scores once per week. This will be fine most of the time, but it is worth remembering when applying for credit.

The business model used by the site encourages people to sign up for loans and other financial offers to earn a commission. There can be very appealing offers since they know a lot about your financial situation, and this could lead to problems. You could be enticed into loans which you would be better off not accepting; the site shouldn't be considered an unbiased source of financial advice.

Using Credit Karma Before Purchasing a House

As mentioned, one of the most significant benefits of using Credit Karma is to build your credit. Doing so is an absolute must if you are going to be buying a home at some point in the future and want the lowest interest rates. Who wouldn't, right? By investing the time in getting your finances the best, they can be, you'll be putting yourself on the right track to get favorable treatment from mortgage lenders.

Lots of buyers end up purchasing homes without the best credit. But why do that if you don't have to? Credit Karma makes it far more easy to get excellent terms and conditions when you are willing to put in the time.

A significant percentage of people are in a position where they need to continue renting or go with a rent to own situation because their financial history does not allow them to do anything else.

Final Thoughts About Credit Karma

More than 85 million people rely on Credit Karma to check their credit score for free. And for a good reason, it allows you to monitor your credit rating regularly so that you can make sure false or incorrect information isn't impacting your financial life. If anything wrong is found, make sure to get it corrected before you need to apply for a loan.

Lots of people would say the pros of Credit Karma far out way the cons. Hopefully, you have enjoyed this candid review of Credit Karma. Give the site a shot and enjoy it!

Other Helpful Real Estate Articles Worth Reading

  • Should you help your kids purchase a house - is it wise to provide assistance to one of your kids to buy a home? This is a hard question to answer because everyone's financial circumstances are different. In the article at Today, see some guidance on considerations to think about when helping children purchase a home.
  • Who keeps the earnest money when a sale falls through - do you know who gets to keep the earnest money deposit when a home sale goes south? In the article at RISMedia, see the circumstances in which both a buyer and seller would be able to keep the money.
  • Reasons for sale by owners fail - are you considering selling your house without a real estate agent? Did you know the success rate for doing so is less than ten percent? You may want to reconsider your decision. In the article at Inman News, see seven reasons why for sale by owners don't have success getting their property sold.

Use these additional resources to make excellent decisions when you are buying your next home.


Posted by

Bill Gassett is a thirty-two year veteran to the real estate industry. He enjoys providing helpful information to buyers, sellers and fellow real estate agents to make sound decisions. His work has been featured on RIS Media, National Association of Realtors, Inman News, Placester, RESAAS, Credit Sesame and others.

Comments (6)

Sheila Anderson
Referral Group Incorporated - East Brunswick, NJ
The Real Estate Whisperer Who Listens 732-715-1133

Good morning Bill. There is no free lunch as you point out and they do share info which then costs you time and sometimes money too.

Jan 24, 2020 06:24 AM
Rose Mary Justice
Synergy Realty Pros - Dandridge, TN
Synergy Realty Pros

More and more people are using Credit Karma.  Their scores have been found not accurate for most I deal with.  The report is there and they have a chance to see what is on it and if need be, fix things before the mortgage process starts.

Jan 24, 2020 06:45 AM
Bill Gassett

I rarely every hear anything negative about them Rose Mary Justice.

Jan 24, 2020 02:39 PM
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Hi Bill Gassett - I am finding that credit card companies like Discover report a score on each monthly statement.

Jan 24, 2020 11:28 AM
Bill Gassett

Interesting Grant Schneider. I don't use discover so I wouldn't know.

Jan 24, 2020 02:38 PM
Debe Maxwell, CRS | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
The right Charlotte REALTOR!

I've used Credit Karma for years and didn't know half of what you discussed in this post. Thanks for teaching me something new about this service Bill.

Jan 24, 2020 02:36 PM
Bill Gassett

Good to know Debe Maxwell, CRS that you got something out of my review of Credit Karma.

Jan 24, 2020 02:38 PM
Richard Weeks
Dallas, TX
REALTOR®, Broker

Great information, thanks for sharing.  I hope 2020 is a great year for you.

Jan 25, 2020 03:38 AM
Bill Gassett

Thanks Richard you as well.

Jan 25, 2020 12:16 PM