Credit Karma’s Free Credit Score – 7 Things You Need To Know

Credit karma is a very popular resource for people looking for information on their credit scores. These are a few important things you should now about creditkarma.com and the services that they provide.

What is Credit Karma.com

Creditkarma.com is the only website that allows you to see you credit score for free. This was true at the time of writing this. You do not need to give your credit card details to see you credit score. You will need to give your social security number. This is what Credit Karma uses to access your credit score for the first time. However, this information is not stored with them. They only use it for first time use.

How is Credit Karma different from other free credit score offers

Credit Karma is different from other offers for a free credit score in the sense that the others are only a trial. You are required to provide your credit card information for a trial to some credit related service, the most common of which is credit monitoring. These trials are offered by all major credit bureaus i.e Experian, Equifax, and TransUnion as well as myfico.com. There are several other well known websites that offer these credit score trials as well.

Should you use Credit Karma or other free trails to see your credit score?

This depends on you really. You can use a free trial to see your credit score. However, keep in mind that it might be difficult to get out of trial which will result in getting your credit card getting charged at least for the first month.

However, if you really do intend to use the service for which you are getting a free trial, then this is not a bad idea. Have a look at the various offers on the website of the credit bureaus and myfico.com to see if there is anything that you can use. Their services include Credit monitoring, 3-in-1 credit reports etc.

Credit Karma on the other hand offers completely free credit scores. You will never get charged to view your credit score.

What credit score does Credit Karma provide.

You will probably be well aware of the fact that there are more than one kind of credit scores in use. Each credit bureau has its own scoring model. On top of this your FICO score from different credit bureaus will probably be different from each other as well.

What Credit Karma provides you with is the Vantage Score. Vantage Score is a credit scoring model developed by the 3 main credit bureaus in cooperation with each other. The result is that this particular credit score will be the same no matter where you pull it from. Vantage Score uses your credit report information from Experian, TransUnion and Equifax and combines them to come up with your credit score. This is the reason why the score does not differ no matter where you get it from.

Who uses Vantage Score

The question obviously arise as to who uses Vantage Score for credit approval. According to the information released by the Credit Karma, the top 5 banks use it along with a host of other financial institutions including car insurance. In fact, Credit Karma also offer an automobile insurance score as well.

Why is Credit Karma free

If you are wondering how can CreditKarma be free when everyone else charges you for your credit score, the explanation is this. Credit Karma uses advertisement and endorsements to earn revenue. You will be able to do much more than just see your free vantage credit score on their website. You will also be able to avail a host of other services like compare credit cards and avail special offers from this credit card companies. There might be other credit other credit offers available as well such as car loans, home loans and savings accounts.

This is a logical outshoot of the service that Credit Karma provide. People interested in knowing their credit scores will also be interested in some credit service or the other. By having tie ups with credit card companies and providing offers to consumers is the way that they earn their revenue. For example they show a credit card that a particular consumer might qualify for. If a consumer interacts successful with these offers, Credit Karma earns a commission.

Should you use CreditKarma

Credit Karma definitely seems to be a good place to see your credit score for free. In fact as we have mentioned, it might be the ONLY place. Even if you are not looking for your vantage credit score in particular, any credit score is always a good pointer to your credit health. So before applying for any credit related service, you can use Credit Karma to check your credit health. They also have a lot of tools and information that can be of help. So go ahead and saunter over to creditkarma.com and make the best of it.

What Is VantageScore

What is VantageScore Credit Score?

As you might well be aware by now there are many different credit scoring systems which use different scales to measure what is a good credit score. Your credit rating will depend on the system being used as well as the parameters that it uses to measure. The VantageScore is used to measure your credit worthiness as well. It is one such credit scoring model among many others such as fico credit score.

What makes VantageScore different from other credit scores? What makes the VantageScore different is that this is the first and the only credit score that has been developed in cooperation between the three national credit reporting agencies, Experian, trans-Union and Equifax. The result is that this is one credit score that is consistent between the three different national bureaus because it is built on the uniform platform and calculated on information shared by the three credit bureaus. Usually what happens is that your credit score from any one credit scoring models such as fico credit score or any other, differs from each of the different credit bureaus because the information in your credit file with each bureau might differ.

How a VantageScore is calculated

Just like any other credit scoring model, the developers of the VantageScore review a set of consumers which number more than 1 million in most cases. The historical credit profiles of these consumers are examined carefully and some labels are identified. While the exact formula and the algorithm of calculating credit score for any scoring model is not known exactly, it is now believed that the credit score is comprised of five major factors or five major credit vehicles that are thought to be most predictive of future credit risk. These five different factors are assigned different risk and weight to calculate your credit score. This is of course a very simplified explanation of the calculation of the credit score. The calculation itself is highly complex and also a trade secret with the developers of each credit were. The breakup of the information used in credit score calculation was first supplied by fair Isaac Corp. for their fico credit score. The credit score is influenced by the following factors:

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Knowing exactly what your credit is by using VantageScore

Another obvious advantage of the VantageScore is that you get a consistent, predictable and a more accurate credit score since the three credit bureaus share information and build it on a common platform. You can maintain a good financial history and make informed decisions and have the result sure positively in your good credit score. Normally, one would be led to believe that a consistent credit scoring system is preferable to one that is not. Consumers find it frustrating many times to have different credit scores from different credit bureaus where the difference sometimes can be large. It is common to find the difference of 20 – 50 points amongst different credit agencies. This can be frustrating. If you have a consistent credit score, you are in a better position to negotiate with the lenders. Knowing your credit score beforehand can put you in a strong position which can save you thousands of dollars over the installment of loan, insurance premium payments etc.

Understanding VantageScore rating.

The VantageScore is based on the traditional A., B., C., D. and F. rating. These letters are affixed to a credit score that is also measured numerically and ranges between 501 to 990. The alphabetical Association are just gives the quick and a general idea of in which range your credit score is. Going back to a typical grading system, you will know that A grade means the best whereas an F. is a bad rating. A more exact picture of your VantageScore is represented by the numerical score.

Can My Spouse’s Credit Rating Affect My Credit Score Negatively

If your spouse has the worse credit score than you do then it is not going to lower your credit score in anyway. Your credit score is going to be based on information present on your credit file whereas your spouse’s credit score is based on information present on his or her credit file. Since credit reports are kept individually and secretary for each person the credit scores also remain individual. The only time that your spouse’s bad credit score may affect you is when you try to apply for a loan jointly. Several lenders require that both spouses take some cans of loans jointly such as a mortgage loan. Due to the poor credit score off your spouse you may get higher interest rates or your credit application may be denied completely as lenders have become more stringent and strict with their qualification criteria.

What Is A Good Credit Utilization Ratio?

The credit utilization ratio is the amount of credit that you use as compared to the total credit limit available to you. It is recommended that you keep your credit utilization to 30% or below. A lower credit utilization represents a lower risk than is good for your credit score. Credit utilization comprises 30% of your credit score calculation. Credit utilization is considered by the credit scoring models individually on each credit card as well as jointly on all your credit cards. Which means that you not only need to keep your credit utilization to about 30% on the credit level available to you jointly on all credit cards but also on each individual credit card. A credit utilization of less than 30% is ideal if you carry a credit balance on your credit card or if your credit card is reported to the credit bureau before your payment is posted.

Does a Bank Overdraft Hurt My Credit Score?

An overdraft allows spending beyond the money that is present in your account. So the banks allow an overdraft facility and while the do allow the transaction to go beyond the mind that is present in your account pay liable to charge an extra fee. Bank overdrafts are not reported that you to the credit bureaus and hence are not likely to have the right impact on your credit score. However if you do not cover the overdraft quickly enough a bank may pass on the debt to a collection agency for recovery. If the collection agency reports to the credit bureau a collection account will be opened on your credit file which will in turn have an effect on your credit score. A collection account will remain on your credit report for a period of seven years from the date that’s the debt was first reported even after you have paid it unless you convince the collection agency to remove it in exchange for payment or settlement.

Credit Score May Get Hurt When a Cheque Bounces

If you pay your credit card Bill through a check and the check is returned for insufficient funds your credit score could get damaged. Your credit card company will charge you a returned check fee and your account will be reported as delinquent to the credit bureaus. One delinquency may not have much of an impact if you’re strong credit history but repeated delinquencies will cause more damage to your credit score. You should ensure that you have enough funds to cover the check and use a check to pay your credit card Bill.

How Will a Debt Settlement Affect My Credit Score?

The answer to this question is pretty much the same as how a late payment is going to affect your credit score. It is impossible to predict accurately as to the impact a settled account is can do have on your credit score.

A debt settlement will typically have a negative impact on the credit rating of person. But the thing to consider is that a debt settlement happens on an account that is already delinquent. If the account has already been reported as delinquent, the negative impact on the credit rating has already occurred. One option that the consumer has during the debt settlement is to try and convince the creditor that he should report the account as paid and closed in exchange for setting the debt. Not many creditors might agree to do this but some may. If you can change the status of your account on the credit report from the link went to paid off, it might actually benefit your credit rating.

Settling debts can have a long-term beneficial effect on your credit score because it allows you to get rid of the debts of the past and move on to building a fresh credit history for yourself. The only negative impact is that future creditors might see that settlements on your credit report and realize that you did not fulfill your end of the bargain of paying back past lenders in full.

An account that has been settled will remain on the credit report for a period of seven years since it was first reported as delinquent. This will have a negative impact on the credit score but the impact will lessen as the information gets older.

You can see the impact on your credit score when you buy your credit score from FICO.com.  You are presented with a list of factors that are affecting your credit score negatively. So if you have settled the did in the past and want to see if it is having any sort of a negative impact on your credit score, you should buy your credit score from FICO.com and see the results more clearly.

How Does a Late Payment Affect My Credit Score?

It is impossible to predict the damage to the credit score due to a late payment for every consumer. The impact of a late payment will depend upon a lot of other factors such as the other information present of the credit report. FICO credit scoring models and other companies will develop credit scores to not reveal the exact details of how calculation is made to the public.

FICO did release FICO score loss information based on two hypothetical situations. In this scenario, the person with 680 credit score will be has one other late payment on their credit history would lose between 60 and 80 points for a 30 day late credit card payment while the person with 780 credit score with no other late payment would lose between 90 and 110 points.

If your credit profile similar to the ones mentioned above then the credit score might suffer a similar dent. You can predict the impact of a late payment on your credit score using the FICO score simulator. It’s available when you purchase the FICO standard product from myFICO.com. FICO standard product includes the credit report from your Equifax or TransUnion credit bureau and credit score.

Does Closing a Credit Card Hurt Credit Score?

Closing a credit card is more likely to hurt your credit score. If you close a credit card that has a balance on it, your credit score will probably drop of you close the card. This is because as soon as you close the card the credit limit of the card is reported to be zero. If you’re still carrying a balance on it your debt level is going to remain the same. 30% of the credit score cancellation is based on credit utilization which is the amount of available credit is that you’re using. Closing a credit card results in no available credit while still having a balance on it makes your credit utilization to more than hundred percent.

Even if your credit card has no balance on it your credit utilization may still increase. When you close a credit card the total credit available to you decreases. This increases the credit utilization ratio. Usually the crepitus advised to keep your credit utilization to about 30% of the total credit limit available to you.

If you have no other major credit cards are an amount that you close your only other cards are store credit cards, then your credit card score could drop. Mix of credit is another factor that is considered into the credit scoring model and constitutes about 10% of your credit score. It looks at the various different credit services such as loans, credit cards that you are using. The more the mix of credit that you are utilizing the better it is for your credit score.

Closing an old credit card account could impact your credit score in terms of credit age which forms about 15% of your credit score. But this won’t happen tells the time that’s the account drops of your credit score which may take a pill 10 years to happen since closed accounts that have been in good standing are kept on a credit report for a period of 10 years even after they have been closed.

Who Calculates and Makes Credit Scores?

Fair Isaac Corporation was of the first organizations to develop the credit scoring model. This credit score was known as the people score and is still the commonest and most prudent credit scoring models used by consumers and businesses alike. In recent times many different scores have developed which are used by different lenders. Many specialized scores have also developed such as insurance scores and mortgage lending scores. The three different credit bureaus also use their own version of credit scores. Some banks also have a system to calculate their own credit scores. Different lenders such as mortgage and automobile lenders may use third-party vendors to calculate credit scores that are more accurate in predicting the risk to their specific business needs.

Most of the credit scores are calculated on the basis of information present on your credit or. Your credit score may differ across the different platforms and depending on which of the three credit what is being used. Difference in the algorithm used and the information on a credit report by result in different credit scores. However, ordering your FICO score is likely to present you with a fairly accurate picture of what your credit rating is like across all other platforms.

Does Mobile Phone Payment Have Any Impact on the Credit Score?

Only the credit usage and the transactions that are reported to the credit bureaus affect the credit score of person. Mobile phone payments and other utility payments are usually not reported to the credit bureaus. Which is why paying these bills is not into have an impact on your credit score. The only situation in which paying bills can have an impact on your credit score is when you are late on an account and the utility service provider decides to transfer the unpaid amounts to a collection agency. If the collection agency reports to the credit bureau than a new collection account will be opened in your credit file and this will impact your credit score negatively.