Knowledge — 1 month ago

Why is Credit Karma Free?

by Keren P.

Credit Karma, Why is Credit Karma Free

How the Free 'Credit Karma' Makes Money

Credit Karma is an American multinational financial company best known for providing services in free credit, financial management, free tax preparation, unclaimed property database monitoring and handling credit report errors. The company offers all of these services free of cost to its customers. But then how does it generate revenue? Let's find out.

Why is Credit Karma Free?

Before Credit Karma came into the scene, consumers were eligible for only one free credit report from each of the three credit reporting companies, namely Equifax, Experian, and TransUnion, in a year. For this again, they would have to apply through the official credit report site, Annualcreditreport.com, and these reports would not show their credit scores which is essential for all consumers to know. To obtain the credit scores, they would have to purchase the score from each company at a hefty price.

Credit Karma

And then, in 2007, Credit Karma came into the market like a knight in shining armor for all consumers. From the very beginning Credit, Karma started offers credit score checks with free access and reports from TransUnion and Equifax to all its customers. All they had to do was register with creditkarma.com, and the company didn't even ask for their credit card details. The customers can track their credit whenever they want and also have access to free tools to help them understand their score. 

So, how does the company afford to provide free services? This company aimed to make credit transparent and understandable to all consumers. They also wanted to help people understand their financial standing. They believe that it is the right of every consumer to know their credit status since it is their data and a lot of things depend on their credit status. From getting a loan, to a credit card approval to a job, everything is affected by their credit score, and they need to be aware.

Why is Credit Karma Free

How do they do it?

Since Credit Karma is offering its services for free and it is not a non-profit organization, it has to generate revenue from other sources. They do this by providing certain offers on their website. They study the credit data provided by the customers to recommend certain customized and relevant products that could help customers improve their credit scores.

By doing this, they are not only assisting customers to manage their credit better but also advertising for other financial companies selling these products, like a credit card or a loan. So, every time a customer takes an offer through Credit Karma, they make money from these partnering financial institutions.

This is a win-win situation for all three stakeholders since the customer saves money, the financial institutions get a new customer and Credit Karma makes money from this deal. But it is alright for them even if a customer turns away an offer. They still won't charge the customer for using their services. This rarely happens though because the offers are tailor-made for each customer and they usually benefit from these, so anyone hardly turns down an offer.

credit score check

Can you trust Credit Karma with your data?

Your credit data and your personal information lie safe with Credit Karma. Although they do use your personal information to recommend customized products and offers, they do not share your information with any third party agency for any purpose.

There are no hidden costs after signing up, and you will never be charged for any of their services. You can check your credit scores any number of times you want and the credit scores provided by them are accurate, as acknowledged by millions of users.


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