If You Need a Credit Score, Credit Karma is the Place to Go

If you are on our my email list you saw that I mentioned Credit Karma‘s new credit monitoring feature.  I thought I would take a moment  to show you how to use Credit Karma’s older, more notable features: Score Center and Credit Report Card. Here’s my quick review of each.

Credit Karma’s Free Score Center

Credit Karma Free Score Center

Credit Karma will give you your credit score for free. What type of score? Well, they actually show you three different scores:

  • TransRisk Score – This is your credit score as provided by TransUnion.
  • Auto Insurance Score – This is a special score derived from your information at TransUnion.
  • VantageScore – This is the new scoring model put together by the three credit bureaus, TransUnion, Equifax, and Experian.

As with any personal finance score, it matters less what your score actually is, and more what direction your score is headed. Thankfully, you can log back into Credit Karma at any time and see the progress of your scores.

Credit Karma’s Credit Report Card

Credit Karma Credit Report Card

The folks at Credit Karma understand that it’s more about helping you improve your credit score. That’s why they created their Credit Report Card. This is really where their service shines. They break down your score into the various factors and give you a rating on each.

Credit Utilization – This is the percentage of your available credit that you are using. For instance, if you have 3 credit cards and they total up to $20,000 in available credit (i.e. credit limits), and you are carrying balances of $1,000, $5,000, and $10,000, respectively. Then you have a utilization percentage of 80% ($16,000/$20,000). Credit Karma uses your credit file to provide this info and then they suggest ways to improve it like: paying off your debt, in addition to advanced strategies like taking advantage of peer lending or a balance transfer credit card.

On-time Payment Percentage – Have you been paying your bills on time? If so, Credit Karma will show you a high score in this area. If it’s low, then all you can do is to start doing better going forward. Set up reminders or automatic payments to ensure your bills get paid on time.

Average Age of Open Credit Lines – This has a lot to do with how old you are, of course. If you’re just getting started with your credit history then this number will be pretty low. Mine is hovering around 5 years (average) because of my recent refinance and a car loan that we took out in 2009. To improve this number, be sure to hang on to older credit cards and occasionally use the accounts.

Total Accounts – The number and mix of credit accounts you have matter in boosting your score. If you don’t have a credit card, consider getting at least a good cash back credit card to improve your credit score. Likewise, a car loan and a mortgage will both increase your credit score. Remember that having credit and using it responsibly are two separate deals. Always treat your accounts with respect, live within your means, and pay off your revolving credit lines each month.

Hard Credit Inquiries – I have two of these affecting my score right now. I know what they are: the refinances I applied for over the past two years. Hard credit inquiries are not the same as checking your credit score just to see the number (like with Credit Karma), nor are they the same as the soft credit pulls that checking accounts and cell phone companies make. Hard credit inquiries are for actual loan considerations: personal loans, car loans, mortgages, refinances, etc. To improve this amount, it’s simple. Don’t apply for any loans unless you absolutely are ready to use it.

Derogatory Marks – These are things like bankruptcy, accounts in collections, civil judgements, etc. Most of these items take 7 years to fall off of your credit file. If you have them on your report, make sure they are legit and then just ride them out till they drop off.

I love this credit report card because it’s the perfect tool to help you really take action on your credit score and what your report is showing. Here’s more about how to get started and how to set up a free account with Credit Karma.

Getting Started with Credit Karma

To get started with the free services at Credit Karma you just need to visit CreditKarma.com, enter your personal information, and in a few minutes you’ll be seeing your credit score and credit report card.

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Last Edited: March 31, 2012 @ 11:46 pm
About Michael Pruser

Michael Pruser is the man. After spending a ton of money to go to the private University of Miami, Michael now enjoys spending time at home, writing personal finance articles for the world to read. His journey out of debt continues 500 words at a time.

Comments

  1. fergusonsarah says:

    Credit Karma sure has a great features.. This will surely come in handy.. :)