Credit Karma has provided free credit analysis and financial literacy and management tools to clients online since 2007. Based in Oakland, California, the company claims over 130 million members in the United States, Canada, and United Kingdom. While best known for offering free credit scores, Credit Karmas services extend through its partnerships to identity monitoring, credit cards, insurance, banking, and credit building.
Business Insiders personal finance team compared Credit Karma Credit Builder to the best credit builder loans and found it to be a standard offering. While it has no fees and flexible payments, it also has negative user reviews and poor customer service.
Building good credit is crucial for getting approved for loans and credit cards with the best terms A good credit score helps you qualify for lower interest rates and gives you access to the most rewards. So how can you build and improve your credit, especially if you’re just starting out? One popular free app, Credit Karma, offers tools that can help you monitor and build your credit.
What is Credit Karma?
Credit Karma is a personal finance company that offers free access to your credit reports and scores from TransUnion and Equifax. They also provide tools for monitoring your credit, getting alerts about changes to your credit reports, applying for credit cards and loans, filing taxes, and more. Their services are all free because Credit Karma makes money from targeted recommendations and advertising.
The app and website are user-friendly. You can easily check your credit scores, view your full credit reports, and get alerts when something changes. Credit Karma also offers education about how different actions impact your credit. Their credit monitoring services are competitive with paid services from other companies.
How Does Credit Karma Build Credit?
The main way Credit Karma can help you build credit is through their Credit Builder program. Here’s how it works:
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You open a Credit Karma Money account, which is a free checking account provided by their banking partner MVB Bank.
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Credit Karma also opens a new line of credit under your name with a limit of $1,000 This is provided by another partner bank, Cross River Bank
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You determine how much money you want to contribute each pay period to your Credit Builder savings account. You can set up automatic transfers.
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Each payment you make toward your Credit Builder is reported to the credit bureaus. This helps build your payment history.
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The $1,000 line of credit increases your total available credit and helps improve your credit utilization ratio.
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Keeping the account open for a long time adds to your average account age.
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After you make 12 on-time payments, Credit Karma reviews your account to see if they can increase your limit, which helps your utilization even more.
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Every time you save $500 in your Credit Builder savings, that money unlocks and transfers back to your checking account for you to use.
The Credit Builder uses the key factors that make up your credit score – payment history, credit utilization, and account age – to help build your credit. Credit Karma reported that members who used Credit Builder saw an average credit score increase of 17 points within just 3 days. The more payments you make on time, the more your score can improve over time.
Other Ways Credit Karma Can Help Your Credit
In addition to the Credit Builder program, Credit Karma offers other features that make it easy to monitor and build your credit:
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Credit monitoring – You get free daily access to your latest scores and any changes in your credit reports. Monitoring helps you catch issues early.
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Score simulations – The app shows how certain actions like paying down debt or opening a new account could impact your credit score.
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Personalized tips – Based on your credit profile, Credit Karma provides tips to improve your credit. This education helps you make better financial decisions.
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Alerts – Get alerts about big changes or suspicious activity detected on your credit reports. This helps you watch out for fraud or mistakes.
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Disputes assistance – Easily dispute any errors you find on your credit reports right through the Credit Karma app. Correcting errors can improve your score.
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Pre-approvals – Apply for pre-approved credit card and loan offers right in the app. This lets you check rates without hurting your credit.
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Secure credit card eligibility – If your credit needs significant rebuilding, Credit Karma can check your eligibility for secured cards that require a deposit.
Credit Karma provides a full set of tools to monitor, protect, and build your credit. Signing up is completely free.
Credit Karma vs MyFICO – What’s the Difference?
MyFICO is the consumer division of FICO, the company that actually creates the FICO credit scoring models used by lenders. MyFICO provides access to your FICO Scores, which are the scores most commonly used in lending decisions.
The key differences between MyFICO and Credit Karma are:
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Credit reports – MyFICO shows TransUnion and Equifax. Credit Karma shows TransUnion and Equifax.
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Credit scores – MyFICO provides your FICO score for all three credit bureaus. Credit Karma provides VantageScore 3.0, which is a scoring model created by the credit bureaus as a competitor to FICO.
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Score accuracy – FICO Scores are more accurate for predicting lending decisions since they are used in 90% of lending decisions. The VantageScore offered by Credit Karma is intended to be educational.
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Pricing – MyFICO costs between $19.95-$39.95 per month. Credit Karma’s services are 100% free.
While the FICO Scores from MyFICO are more predictive, the free access to scores and reports from Credit Karma can still be extremely helpful for monitoring your credit. Credit Karma also offers additional tools and features that MyFICO does not provide, like credit building and fraud alerts. Many people use Credit Karma in addition to MyFICO or a paid service for the most complete view of their credit.
Tips for Using Credit Karma to Build Credit
Here are some top tips for getting the most out of Credit Karma if your goal is to build credit:
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Check your scores frequently – at least once a month. This helps you monitor progress.
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Read the detailed reports regularly. Make sure all information is correct.
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Pay all credit accounts on time each month. This builds positive payment history.
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Keep credit card balances low. High balances hurt your credit utilization.
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Sign up for Credit Builder and maximize contributions.
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Take advantage of score simulations before major credit applications.
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Leverage educational articles and videos to improve your credit knowledge.
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Set up fraud alerts and monitor reports for suspicious activity.
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Dispute any inaccurate or unrecognized information on your reports.
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Be cautious about applying for too many new accounts in a short period.
Credit Karma provides an easy, free way to monitor and improve your credit. Just be sure to check your real FICO Scores periodically from MyFICO as well for the most accurate view of your credit health.
Common Questions about Credit Karma for Credit Building
Here are answers to some frequently asked questions about using Credit Karma to build credit:
Does Credit Karma hurt your credit?
Checking your credit reports on Credit Karma does not hurt your scores. A “soft inquiry” is done to show your reports that does not impact your credit. Hard inquiries from applying for credit do impact scores temporarily.
Is there a Credit Karma app?
Yes, you can download the free Credit Karma app for iOS or Android mobile devices to easily access your account on the go.
Is a credit score of 700 good?
Most people consider FICO credit scores above 700 to be good and above 750 to be excellent. The VantageScore on Credit Karma uses a different scale but a 700+ is generally good.
How long does information stay on your credit report?
Most negative information falls off your credit reports after 7 years. Bankruptcies can stay for up to 10 years. Positive information stays on your reports as long as the accounts remain open.
How can you build credit fast?
Some of the fastest ways to build credit are becoming an authorized user on someone else’s account, taking out a credit builder loan, opening a secured card, or getting a cosigned loan. Using Credit Karma’s Credit Builder can help too.
Is it safe to give Credit Karma your social security number?
Yes, Credit Karma uses bank-level encryption and security measures to protect your data and identity. They use your SSN only to pull your credit reports.
The Bottom Line
Credit Karma provides a free and easy way to monitor your credit reports and scores every day. The Credit Builder program allows you to build positive payment history on a new line of credit to help improve your credit. Combined with credit education and other tools, Credit Karma gives you tremendous access to help monitor and improve your credit.
Just keep in mind that the VantageScore they provide is intended for educational purposes, and you should check your true FICO Scores periodically to get the best sense of your credit health. But overall, Credit Karma is a great free resource for building your credit from the ground up.
Compare Credit Karma to Other Credit Builders Self Rent Reporting
Reports to all three credit bureaus and connects directly to your bank account.
$0-$6.95 monthly + optional $49.95 fee for retroactive reporting
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. Rent reporting is free of charge
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. Credit score monitoring
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. $1M identity theft insurance
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. Three-bureau rent reporting
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. Utility and cell phone payments
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. Doesn’t require landlord’s approval
- con icon Two crossed lines that form an X. Poor customer service experience
- con icon Two crossed lines that form an X. Cell phone and utility payments only reported to TransUnion
Self Rent Reporting reports your rent and other bills to the credit bureaus. This improves your payment history and as a result, your credit score, without needing to take on debt. One of the companies listed in our guide on the best rent reporting services, Self Rent Reporting stands out for offering several credit building perks under one competitive price.
- Reports to all three credit bureaus
- Connects directly to your bank account
- Reports your rent, cell phone, electric, water and gas payments
- $49.95 optional fee for 24 months of retroactive rent and utilities reporting
- $6.95 per month
- Add two years of past payments
- Results vary. You may not receive an improved credit score. Not all lenders use scores impacted by rent/utility payments.
no monthly service fee
up to 4.00% bonus
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. 3 Savings Pods that let you earn up to 4.00% bonus
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. No minimum opening deposit
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. No monthly service fees
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. No overdraft fees
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. No instant transfer fees to other Current members
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. Early direct deposit
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. Debit card included
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. Budgeting tools: Round-ups and Spending Insights
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. Earn cash back on debit card purchases
- con icon Two crossed lines that form an X. $2.50 out-of-network ATM fee
- con icon Two crossed lines that form an X. Cant overdraw from your account without the Overdrive feature
- Access to 40,000 fee-free Allpoint ATMs
- You may overdraw up to $200 from your account with no overdraft fees if youre eligible for Overdrive
- To be eligible for the Overdrive feature, youll need to receive direct deposits $500 per month
- 3 Savings Pods: You may deposit up to $2,000 in each Savings Pod; Money that is kept in Savings Pods can earn 4.00% bonus
- Round-Ups: Debit card purchases are rounded up to the nearest dollar and the change is deposited into a Savings Pod
- Spending Insights: You can create a budget that keeps track of specific categories of spending; Spending Insights monitors how much you spend and can issue alerts if you are close to your limit
- Cash back: You can earn cash back at 14,000 select stores when you use your debit card; Points be redeemed at the Current Shop for cash
- Issued through Choice Financial Group (Member FDIC)
Make on-time monthly payments to build credit history and add to your savings.
$0 intro for the first year, then $25
No credit and limited credit
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. Easy to be approved with bad (or no) credit
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. Effective tool for building credit
- Check mark icon A check mark. It indicates a confirmation of your intended interaction. Automatically be reviewed for credit limit increases
- con icon Two crossed lines that form an X. No welcome bonus
- con icon Two crossed lines that form an X. No rewards for spending
- con icon Two crossed lines that form an X. $25 annual fee
Getting approved for a credit card can be challenging if you have a negative or non-existent credit history. The Self Visa® Credit Card offers an innovative solution that bypasses the traditional credit card application process, making it easier to get approved while also helping to build or repair your credit. However, getting the card involves several steps, as well as costs you wouldnt incur with other credit cards.
- *$0 annual fee for the first year only. $25 annual fee after. 28.24% Variable APR. Limited time offer.
- To be eligible for the Self Secured Visa you first have to have an open Credit Builder Account, make three monthly payments on time, have at least $100 in savings progress and have your account be in good standing
- There are no hard credit checks
- Minimum credit limit is $100
- Minimum security deposit is $100
- Credit limit increased as you make monthly payments towards your Credit Builder Account
Credit Karma Credit Builder is a credit builder tool that helps you build credit by impacting some of the largest factors in determining your credit score: payment history, credit utilization, age and type of credit, and balances. Credit Builder uses a revolving Line of Credit to help you save money. Every payment you make toward the balance on your line of credit is reported as an on-time payment to the credit bureaus.
The qualification requirements for the Credit Karma Credit Builder account are mostly straightforward. You must be at least 18 years old with a valid United States address and Social Security number. The one uncommon requirement is that only applicants with TransUnion credit scores below 619 are eligible. If your score is higher, Credit Karma reasons, the Credit Builder may not improve it. There are no minimum credit or income requirements, and applying wont result in a hard inquiry on your credit report.
If you have a limited or negative credit history, Credit Karmas Credit Builder account can help you establish or repair your credit when you make consistent, on-time payments. The account doesnt require a credit check for approval and has no fees or interest charges, making it an inexpensive and accessible option compared to the best credit builder loans.
However, youll need to be comfortable locking up your funds until you reach the savings threshold. Read on to see whether Credit Karmas Credit Builder account is a good fit for you.
Why You Should Trust Us: How We Reviewed Credit Karma Credit Builder
The most important factors in our rating are trustworthiness, the fee structure and affordability of the product, and features provided — specifically prioritizing the number of bureaus reported to.
With Credit Karma Credit Builder we looked closely at its reviews and what the customer experienced when working with the company. We also checked that it reports to all three major credit bureaus, its fee structure, and availability. We scored the product on the following factors:
- Trustworthiness
- Fee Structure and Affordability
- Features
- Flexibility
- Availability
Read the full methodology for how we rate credit products.