Credit Karma Makes Money
Credit Karma is a free credit score and monitoring website that offers consumers an accurate and comprehensive picture of their financial standing. Its offerings also include a range of credit card and loan recommendations based on their individual credit profiles, as well as personal finance tools such as a debt calculator and savings tracker. It has been reported that 60 million people use Credit Karma on a regular basis to obtain their TransUnion credit scores and monitor their credit reports. But how does this fintech resource earn its keep?
Credit Karma works on the simple principle of identifying two distinct customer groups: consumers looking to discover their credit scores, and companies (i.e. lenders and credit card companies) looking to sell these consumers products. The company then designs and delivers its services in a way that creates value for both of these customer groups.
To do this, Credit Karma collects more than 3 terabytes of data every day and feeds it into hundreds of different algorithms. Its algorithms are designed to help users achieve their financial goals by highlighting credit cards, loans, and other products that are most likely to be approved based on their individual credit profile.
How Credit Karma Makes Money
In addition, the site also offers a wide range of credit product reviews and comparisons, as well as a tool to forecast how your credit score will be affected by certain actions such as opening a new card or refinancing a mortgage. Its free tools are also available to non-members, but they will not receive personalized recommendations or access to their TransUnion credit report.
Unlike some of its competitors, Credit Karma does not sell your credit data to third parties. Its revenue comes from product recommendations and commissions earned when you apply for credit cards or loans through the site. Credit Karma will also recommend other credit products that are a good fit for you, such as a cash back rewards credit card or a home equity line of credit.
Credit Karma also offers a variety of other free services, such as an identity theft protection service and a checking account. Its checking accounts, which are held in partnership with MVB Bank, offer FDIC-insured deposits. In addition, the company also offers a savings account that allows you to set aside money automatically into an interest-bearing savings account.
When it comes to offering its credit card and loan recommendations, the company does a lot of work behind the scenes to ensure that their customers are not being targeted by unscrupulous lenders. It uses an algorithm that compares a potential applicant’s profile with the profiles of other Credit Karma members who have been approved for a particular type of product. It then calculates the likelihood that an applicant will be approved for a specific product and presents this information to them. It also makes sure that the products it recommends are aligned with the company’s mission to empower consumers with transparent and unbiased financial advice.