Credit Karma is an aptly named free personal finance app. Be conscientious about your credit, it implies, and you'll be rewarded with an enviable credit score. Your credit score is the first thing you see when you log in to Credit Karma, and much of the app focuses on helping you understand and improve it. It does so by encouraging you to be smart about your debt and the financial products you chose, such as credit cards, mortgages, insurance, and car loans. Credit Karma is good at what it does and has one thing that most competitors don’t: The ability to track payments on existing credit cards and other loans. It also offers a checking account designed to help improve with low credit scores. That said, its multitude of financial product recommendations are intrusive.
Among personal finance apps, our Editors' Choice winner is Simplifi by Quicken, which has tools for making budgets and managing your money. That's radically different from what Credit Karma does, so there's no reason you couldn't use both. NerdWallet is another app that also helps you track your credit score, and it goes further than Credit Karma in teaching you how to improve your finances.
What Is a Credit Score?
In simple terms, your credit score is a measure of your creditworthiness: How likely are you to pay what you owe in full and on time? You may have had a credit score pulled by a car dealership or a bank while applying for a car loan or mortgage. Potential landlords and employers may even have requested yours.
The score is compiled by three major credit bureaus, Equifax, Experian, and TransUnion, based on your history of paying your debts. If you’ve borrowed from a lender that reports to the credit bureaus for at least six months (usually a credit card), you have a credit score. It ranges from 300 to 850. The higher, the better.
Keeping an eye on your credit score for changes is one way to watch out for financial fraud. If someone takes out a loan or line of credit in your name and doesn't make payments on it, your credit score will drop.
Your credit score is the focal point of Credit Karma and a few other personal finance apps that specialize in it, like WalletHub and Credit Sesame.
How Much Information Do You Have to Give Credit Karma?
To use Credit Karma, you need to provide your name, address, and a few other personal details, such as your Social Security number so that the site can pull your credit information. To get a thorough profile and an estimate of your net worth (and a wider swath of recommendations), give Credit Karma the address of any homes you own and tell it about your vehicles.
Is Credit Karma Safe to Use?
Credit Karma has several security features. They include 128-bit or higher encryption, multi-factor authentication, and security questions. Like any other good personal finance app, Credit Karma automatically signs you out after a period of inactivity. You can read more about the app’s security practices here.
Credit Karma's Focus on Your Credit...and Its Ads
When you first log into Credit Karma, you see two credit scores prominently, from TransUnion and Equifax. WalletHub and the free version of Credit Sesame only give you one. Most people don't really benefit from getting two credit scores since the credit bureaus are generally within a couple of points of one another, if not identical. The app also provides some key numbers when you first log in, like your home equity and borrowing power.
But then, the app immediately starts suggesting financial products. They're essentially ads, though they're highly targeted. If you're in the market for a new credit card or bank account, they can be helpful. You get many more recommendations for auto insurance, credit cards, home equity loans, and so on as you use the app, but Credit Karma starts early. Not all personal finance apps are so aggressive. NerdWallet, for example, displays charts related to your cash flow (because it can import your bank transactions) and net worth right away, in addition to your credit score. Mint does the same.
(Credit: Credit Karma/PCMag)How Does Credit Karma Know What Financial Products to Recommend?
Credit Karma’s recommendations are based on what it knows about you and the financial products themselves. Each offer includes your odds for approval. If you see one of your recommendations labeled “Karma Guarantee” and you aren't approved, Credit Karma pays you $50. You can also search for credit cards using filters like rewards and balance transfers.
(Credit: Credit Karma/PCMag)But how do you know if a suggested financial product is any good? Credit Karma posts a lot of information about these products through its own reviews, user reviews, descriptions, and comparisons. Credit Karma contributors, not the issuing companies themselves, provide this editorial content, making for more objective analysis.
WalletHub also has reviews of financial products, and they're more thorough than what you get from any other personal finance app. Besides providing the basic specs for each offering, like any annual fees and the APR, there are reviews written by WalletHub staff, a lengthy Q&A, and customer reviews, sometimes thousands of them.
Why Is Credit Karma Free?
Credit Karma gets compensation from its third-party advertisers—in other words, companies whose financial products are featured on the site. Those companies do not get to review, approve, or endorse editorial content. Advertisers, though, may have some influence over how and where products appear on this site, such as the order in which they appear. Keep in mind that Credit Karma’s offers do not represent the entire universe of financial service companies and products. You only see what Credit Karma decided to include.
What Can Credit Karma Teach You?
Your credit score changes over time, as do the offers you see on Credit Karma. As your score moves, you can take advantage of Credit Karma’s educational tools to learn more about that critical number and how you might be able to improve it.
One thing you learn about are the factors that determine your credit score. These factors are payment history, credit card use, derogatory remarks, credit age, total accounts, and hard inquiries. Each factor is assigned an impact level, so you know which ones weigh more heavily on your score.
(Credit: Credit Karma/PCMag)You also learn loads about your credit report. Your credit report lists all the credit accounts reported to the bureaus in your name, both closed and open. Each active account contains a detailed overview of your payment history, balance and credit limit, date opened, and account status and type. There are also sections for hard inquiries, collections, and public records, such as bankruptcies and legal judgments.
You also get a few features that help you better understand your credit, including the following Credit Karma tools:
A credit score simulator that shows how your credit score might change based on new activity. For example, what would happen if you missed a car loan payment or opened a new credit card?
A debt repayment calculator that provides advice on paying down your debt faster.
A simple loan calculator, which calculates the actual costs of having a loan.
Your relief roadmap—a list of resources and programs for your state that can help you find income and benefits, manage your expenses, and protect your credit.
Notifications via email, in the app, or sent to your mobile device that alert you to data breaches or identity theft, changes to your accounts or credit report, and information related to your Credit Karma profile.
Score Hacks, or personalized advice for improving your credit score.
Credit Karma's Optional Banking Services
Credit Karma offers two bank accounts, a savings and a checking account, through MVB Bank, Inc., Member FDIC. They're optional, so you don't have to sign up for them to use Credit Karma, but you need the checking account if you want to take advantage of the bill tracking and Credit Builder features (more on them later). Credit Karma Money Save is the savings account that, as of this writing, is earning a high rate of 4.10% APY. The checking account is called Credit Karma Money Spend, and if you have your paychecks deposited there via direct deposit, you could get paid up to two days early. A Visa debit card is included. The accounts have no fees and no minimum.
PCMag isn't in the business of evaluating financial products and has no opinion about whether these bank accounts are worth having.
As mentioned, Credit Karma has another financial service called Credit Builder. It's a program that helps people build good credit, and you can apply for it if your TransUnion credit score is 619 or lower and you have a Money Spend account. With it, you get a combination savings account and a $1,000 line of credit offered through Cross River Bank, Member FDIC. You can increase your credit limit by signing up, and your on-time payments get reported to the three credit bureaus to help boost your credit. It’s free, and there’s no fixed term.
Should You Sign Up for Credit Karma?
Credit Karma’s credit score tools, data, and educational content are similar to what’s offered by Credit Sesame and WalletHub. It distinguishes itself by providing financial tools and products like bill tracking and Credit Builder, which are superior to some other personal finance apps that focus on credit scores—though you need to get the checking account that Credit Karma offers to get those features.
NerdWallet, however, has the same features as Credit Karma, plus bank transaction import and voluminous educational content about personal finance. WalletHub’s staff researches and profiles financial products better than anyone. Since they’re all free, you can use the best elements of each. Our Editors' Choice winner among personal finance apps is Simplifi by Quicken, which is a different sort of personal finance app because it helps you create budgets and actually manage your money. You can certainly use it in tandem with a credit-focused app, such as Credit Karma, though we like NerdWallet a little more for that.