Home-mortgage interest rates remain low, and a lot of people (myself included) have refinancing on their minds. But if you’ve got a lousy credit score, you could have trouble getting a good offer.
Credit Karma, a website that offers free credit card scores, recently released an Android app. (The site also offers an iOS app.) The app provides free credit-score monitoring and alerts, as well. Plenty of paid credit-score offerings exist. Some promise free services and then require payment after a trial period. So is Credit Karma a legit free service? More on that in a second.
After you sign up for a Credit Karma account, enter your information—including your social-security number—and answer a few questions, the app displays your credit rating (from very poor to excellent). Your score is shown as a numerical value and displayed on a graph.
You also receive a variety of helpful notifications. Notifications include a look at your payment history/accounts in good standing, how many credit inquiries you have made (inquiries can cause your FICO score to drop) and whether or not you have high overall credit card use or are near the limits of one or more cards.
When you sign up for Credit Karma, you enroll in its free daily credit monitoring. You receive free email alerts whenever a "significant change" is identified on your credit card, such as new credit inquiries.
So how does Credit Karma offer these services for free when similar offerings require payment? The company only says that its free credit scores are "sponsored by partners." The app displays ads for credit cards, but they are unobtrusive. Presumably, Credit Karma gets a cut if you sign up for any of its partner offers.
Unlike many other services that promise free credit-card monitoring, Credit Karma doesn’t make you enter a credit card number to use its services. Even so, a free credit scoring/monitoring service raises several privacy and security concerns. Credit Karma says that although it collects and stores some data about you, the company "will never share your information without your explicit permission." Social security numbers are only used when retrieving your first score and aren’t stored in its database, the company says.
Credit Karma uses 128-bit encryption to secure your info. Its activities are verified by VeriSign and TRUSTe. And the company’s servers are "physically protected from unauthorized access in a secured location." The Android app also lets you secure the app with a four-digit passcode. (I didn’t test the iOS app.)
Credit Karma doesn’t show your FICO score. Instead, it supplies your TransRisk New Account Score, VantageScore and Auto Insurance Score, all supplied by TransUnion. The company also says its inquiries won’t affect your FICO score. If all this sounds like Greek to you, Credit Karma’s FAQs page might help.
I'm a bit concerned this is all too good to be true, but a Google search for terms such as "credit karma scam" didn’t turn up any legitimate complaints. I’m no expert, but my impression is that Credit Karma appears to be a legitimate and useful service. Whether the company can make enough money from partner offers to stay in business is another matter entirely.
(Screen shot by Credit Karma, Inc.)