Part of being twenty-something includes the growing pains of getting all your ducks in a row, including major life milestones such as: obtaining that first full-time job, contributing to a 401(k) account, learning about the housing market, and straightening out personal finances. Today, I want to share a few tips on how to check your credit report.
From applying to credit cards to renting or even buying a home, maintaining a good credit report is an imperative (and potentially headache-inducing) rite of passage to adulthood. But it shouldn’t have to be that way. As you know, banks and tenants run hard credit reports to ensure applicants are trustworthy candidates who have proven themselves to be responsible with their money. However, hard credit inquiries are reflected on your credit report, and too many can be detrimental to your overall score. How then, does one go about running soft credit reports that do not show up on your credit score? Enter Credit Karma.
San Francisco-based start-up Credit Karma is a completely free and legitimate website that provides a proprietary credit score to consumers (meaning you and I). Consumers are provided with an aggregate score from the TransRisk credit score, the VantageScore, and the TransUnion Auto Insurance Risk Score. The average score is generated from TransUnion’s TransRisk score model, which is used by most credit monitoring sites. Credit Karma’s score model ranges from 300 to 850, the same scale as the FICO Score, the credit score most often used by lenders. You might be asking, how is Credit Karma able to provide free online credit monitoring when other companies charge for similar services? Well, Credit Karma’s business model involves selling targeted advertising for financial services (think auto insurance companies, credit card offers, and the like). This advertisement revenue offsets the cost of credit score tracking, hence providing a free service to consumers. In addition, they rely on word-of-mouth for business growth rather than paid advertisements popular amongst their competitors. A good sign is that recently, Credit Karma raised an additional $30 million from venture capital firms, as they seek to expand their credit tracking services to become more financially all-inclusive, like Mint.com.
Credit Karma is a useful tool for those looking to obtain a ballpark estimate of their credit score without affecting their score or paying a dime, though the score should be taken with a grain of salt (scores obtained from Credit Karma is typically 50 points higher). What I like about Credit Karma is their user-friendly platform. With a click of the “update” button, I can easily see my credit score and credit rating. Additionally, their credit report card provides valuable information about my open credit utilization, percentage of on-time payments, average age of open credit lines, total accounts, credit card summaries, number of hard credit inquiries, total debt, and debt-to-income ratio. This 24/7, online service can certainly be used to our advantage, as all of us twenty-something’s should be educated about our credit scores. Overall, Credit Karma is a great starting point to helping us understand our credit, potentially improving our score, and progressing to more financially complex topics that come with adulthood (le sigh).
Credit Karma Company Profile l CrunchBase
Credit Karma Raises $30 Million, Expands Beyond Credit Monitoring l TechCrunch
Why You Should Never Pay For Your Credit Report l Huffington Post (by Ken Lin, Credit Karma CEO)