This is part of our Rockstar Reviews series.
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An Easy Way to Monitor Your Credit Score
Credit Karma is your one-stop shop to monitor your credit score for free – as often as you want. Just login to your Credit Karma profile and your credit score is displayed. No clicking around. No hassle. Login and it’s there.
What is a Credit Score?
Your credit score is what banks and other financial institutions use to determine how likely you are to repay a loan. It can also determine your loan’s interest rate. Your score contains your payment history, amount of open credit, delinquencies, public records and a few other financial qualifiers.
Credit scores typically range from 300 to 850 – worst to best. The higher your credit score, the better your chances of getting a loan at a low interest rate. About 1/3rd of your score is determined by your payment history. Another third comes from outstanding debt. The final third of your score is based on how long you’ve had credit, credit types and recent new credit (i.e.: opening a new credit card).
Credit Karma uses the new VantageScore 3.0 standardization being adopted by major credit agencies, making your credit score much more consistent between agencies (though it still may not completely match). It also makes qualifiers like payment history, credit type and credit utilization weigh much more significantly than other factors, as well as removing collection accounts that have been paid in full which is nice.
Oh, and don’t worry – checking your score through Credit Karma will not affect your credit score because it’s not an “official” credit check.
Here’s How it Works
Credit Karma uses your information to obtain credit scores from two reputable financial institutions (TransUnion and Equifax), and then displays both numbers in your Overview page. The interface is clear and uncluttered, making it an easy process to navigate through the pages that interest us the most.
Click over to the Credit Reports page for a more detailed look at your credit numbers. This is how the Credit Reports page looks for me:
830 – not bad :) Keep scrolling down the page for details on how your credit score was determined, including your financial accounts, credit inquiries, public records and collections.
You can also check out your Credit Report itself from the Credit Reports page, and Credit Karma makes it insanely easy to browse through your report in a way that actually makes sense. To access either your TransUnion or Equifax credit reports, click the link under the credit score.
For example, go to TransUnion Credit Report. The next page displays all the juicy details of the report.
The report’s organization is pretty slick. It keeps track of all your financial accounts, inquiries and unpaid collections, along with public records. Stay on the Overview tab if you want a higher level look at your report. But, data-geeks out there will love the ability to drill down into specific areas of the report.
For example, click the blue Accounts tab to view all of your financial accounts. Click the arrow to the left of the Account Name to display the details of the account. Here is a closed Ally Financial account for a car loan that I’ve paid off.
Super cool. It’s easy to see that there were no missed payments. The term, payment amount, balance, as well as a monthly-break out of payment history is all right there, nicely organized and easy to read.
At the top of the page, click on the My Recommendations link. Here is where Credit Karma makes their money. The system will analyze your credit score and payment history and recommend a collection of credit cards that maximize rewards and cash back. There is no obligation to sign up for a single card, but it can be enlightening to learn about your options.
If you take advantage of these offers, they make some cash.
For example, here’s a screenshot of one of my recommendations. My approval odds are “Very Good”. Cash back is decent. The annual fee, though, is somewhat high. Click the Apply Now button to apply for any of your recommended cards.
Be careful! While it’s educational to learn about your options, resist the temptation to sign up for a bunch of new credit cards. Annual fees add up and carrying a bunch of credit cards around with you may encourage additional spending. Only apply for the cards that you need.
Credit Score Simulator
One of my favorite features is the Credit Score Simulator, which is accessible by clicking the link down the left hand side of your Overview page. The simulator is Credit Karma‘s best guess at what affect major financial decisions may have on your credit score.
For example, how would an auto loan affect your score? Let’s find out. Click the Get a New Loan link from the Credit Score Simulator page, then select Auto Loan.
Next, enter the dollar amount, then tap the Submit button. Your estimated score is displayed. In my case, I entered $50,000 and my credit score dropped from 833 to 823.
Remember, these are only estimates. There’s no way for Credit Karma to know exactly how your numbers will change. However, it is a good ballpark estimate.
Check out the Resources link at the top of the page for other calculators.
Their New Tax Service
One feature I have to point out is their brand new tax service. It’s an online system that allows anyone to file their taxes online for free. E-file for state as well as federal. You keep the refund.
And yes, even more complex tax returns can be filed. Most common forms are supported, including itemized deductions, capital gains and losses, dividends, tuition payments and much, much more. Check out their full list of supported tax forms.
Best of all, they guarantee no up-sells or hidden fees. Gravy!
What I Don’t Like About Credit Karma
Credit Karma needs to make money somehow, and they do it through credit card recommendations, but also through other financial services like car loans, mortgage refinancing and even student loans. Much of the website is devoted to these financial services even if we have no interest in them.
To their credit, we are not bombarded with pop-ups and other intrusive advertisements for these services. They are easily accessible from the top of the page and clearly marked for those who may be interested.
For the rest of us, we will probably spend the majority of our time on our Dashboard and Credit Report pages, as well as checking out their calculators and simulators.
You can sign up for free here.
Most Rockstar Reviews here include affiliate links to the companies being featured. This one does not, but if they ever offer it to us we’ll gladly swap it in as we’re big fans :)
Steve handles the operational side of Rockstar by keeping the systems running smoothly, social media accounts active and curation buttery smooth. He also answers to the name “Do-It-All Boy”.
Steve is also the founder of ThinkSaveRetire.com – a site where he shares ideas and techniques on how to retire from your 9-5 job and start to enjoy the virtues that life has to offer outside of full-time work. Life is about more than fluorescent lights and gray cubicles!