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Inside the World of Credit Karma: How does Credit Karma Work?

how does credit karma work

Everyone needs a bank loan or a credit card at some point in life. A loan or borrowing from a bank in form of credit card may be used by everyone depending on their financial needs, for instance, some may be using loan for education or a vehicle or any asset and some might be using loan or credit card to buy daily staples or consumables and some might be paying all utility bills on credit cards. Whatever the need be, a Loan or a credit card become essential for financial goals.

Now if anyone needs a loan or a credit card they might have to approach a bank or a credit card company. A bank or credit card company does not give a loan just when anyone stands in front of them and ask for it. There are a certain set of procedures and evaluation by these banks and credit card companies before they issue a loan to anyone. Each individual is given a Credit score depending on their past financial records that the companies might have got from the rating agencies. These agencies give credit score which enables the bank to give or plan desirable loan to the beneficiary. Credit Karma is one such financial entity that gives anyone a free credit score report.

Credit Karma was found founded in 2007 by three co-founders Kenneth Lin, Ryan Graciano, and Nichole Mustard. The company is based out of San Francisco, United States. The company’s mission statement states that it intends to make every individual feel confident about their finances. It gives free tools and education for planning finances and makes real and meaningful progress in their financial goals. Credit Karma believes that its job is to make financial planning a simple job instead of a frustrating one.

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Now let us, in brief, understand what is a credit score and how it is evaluated, which will answer the question “How does Credit Karma work?”

A credit score is a three-digit number that gives an idea of how likely an individual will repay debt. This three-digit number helps Bank to evaluate whether to approve a loan or not. An individual might be having more than 1 credit score for the fact that there are mainly three credit bureaus namely Equifax, Experian and TransUnion and there are two evaluation models namely VantageScore and FICO which have a different scoring methodology. Apart from these models, these bureaus use their proprietary models to evaluate credit score.

The Credit scores do not discriminate based on gender, race, nationality, religion or marital status but only evaluated past financial performance. The credit scores consider following points for rating

1) An individual’s payment history

2) Current Liabilities and loans secured by an individual and their types like a student loan, Auto loan or Asset loan or any other loan.

3) Tenure of current loans and liabilities

4) Total credit limit offered to Individual and amount of loan secured based out of the credit limit

5) Repayment regularities and defaults if any.

Credit Karma offers these Credit reports from bureaus namely Equifax and TransUnion to an individual absolutely free without any fees. The reports are updated weekly.

We just saw about what is credit report and how does Credit Karma work. Now let us understand services offered by Credit Karma and How does Credit Karma make money.

How does Credit Karma work? – this question has been in the news for quite some time now. This point answers the question nicely. Credit Karma offers free Reports of credit of an individual. Using these credits, an individual can opt for loan or credit card. Since these reports are free, Credit Karma offers a wide range of services on a chargeable basis. The reports enable an individual to plan finances without a hassle and opt for other services offered by Credit Karma.

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How does Credit Karma Work for Credit Cards?

Credit Karma has tied up with a various credit card offering companies and provides a credit card to individual applying for the same. Any individual can directly apply for a credit card from Credit Karma portal and the card gets processed post verification and documentation. Credit Karma earns a commission out of Paid advertisement and commissions from these card companies. The credit card offering is again divided into few categories as per interest and need of the customer.

Overall Top rated and Best Credit Cards

Under the segment of credit cards, the company offers credit cards of various banks and financial companies that are best rated and most liked and used by customers and the ones that customers strongly recommend. These most popular cards are featured in this list enabling users and customers to directly apply for them.

Balance Transfer cards

Under balance transfer cards the company offers credit cards from those banks and institutes that offer higher limits or better options inform of lesser fees or easy paybacks and transfers old balances to existing cards.

Lower Interest Cards

Credit Karma evaluates companies that offer lower interest rate cards which might be beneficial to the client or customer when the usage is higher.

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Reward Cards

A lot of people spend via credit card in order to not only fulfill their temporary finance goal but also earn reward points and use those reward points for shopping, travel or gift or vouchers of brands or food. Reward cards specially designed for the use of customer who intends to use reward points for purchases and gifts. In these cards generally, a customer earns more reward points than a basic or low interest or balance transfer credit card. Reward points can be redeemed against any gifts, travel, Shopping, food, brand coupons, and vouchers, magazine subscriptions and luxury goods.

Cash Back Cards

Cashback is much lucrative to customers who specifically look for such cards. Many credit cards offer the facility of earning cash back on each spend. Since a cashback is almost an instantaneous, customers select these credit cards for instant discounts. Credit Karma offers cash back cards from various financial institutions.


Customers booking more flights prefer Airline credit cards that convert spends into equivalent miles for future travels. Credit Karma offers such airline specific cards to its clients


Credit Karma also offers credit cards designed specifically for students keeping in mind their needs and financial capability.


Credit Karma offers sports-related credit cards to customers whose spends are related to sports goods or tickets to tournaments.

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How does Credit Karma Work for Loans?

Loans are another big service offered by Credit Karma through which it makes money. Loans are offered by Financial institutions and banks and Credit Karma earns out of Advertisements and each referral. The types of loans offered by Credit Karma are as below

Personal Loans

Credit Karma offers personal loan which is loan offered to an individual generally at higher interest and the bank takes few documents as a guarantee.

Home Loans

Credit Karma offers attractive home loans to individuals and families who need a loan to build or buy a residential property.

Auto Loans

Auto loans are one of the most popular loans which are availed by almost everyone. Credit Karma offers a wide range of auto loans depending on the vehicle to be purchased by an individual or entity.

Student Loans

Students opt for a student loan to finance their education and grow in career. Credit Karma has tied up with a number of institutions that offer loans to students depending on their courses, universities and education segments.

Business Loans

Each business needs a loan to grow or as working capital or to buy machinery and assets. Credit Karma offers loans to businesses as per their requirement.


Auto loans are one of the most popular loans offered by Credit Karma. Majority of people buying an automobile need a loan and it is provided based on the type of automobile and it’s model be it brand new or old one and be it a personal automobile or commercial.

Refinance of loan

Credit Karma offers one important service of Loan Refinancing. A loan refinances program helps an individual or a business obtain a further loan on an ongoing loan. Loan refinancing is available to people who have secured a loan, repaid a certain portion of the same and obtain the same or higher amount again in the existing loan. In this case, an individual might have to change the financial institution or bank for a higher loan.

Auto Insurance

Each automobile has to be insured as per government norms. Credit Karma offers auto insurance and renewal options from more than 10 Insurance companies for its customers. Post-purchase, the insurance companies pay a fee to Credit Karma. Credit Karma offers both Full and Third Party insurance on its platform.

Identity Monitoring

One unique and important service offered by Credit Karma is identity monitoring. Under this service, it offers to safeguard data of Customers from breach and theft. The customer has to share their email addresses and Credit Karma scans it over the dark web and finds out breaches if any across the globe over the internet. With these reports, it allows customers to identify, take action on the breach.

Unclaimed money

A very important service has been recently started by Credit Karma is allowing it’s customers to check any unclaimed funds that the customer might have invested or have received but were unclaimed. This enables customers to claim those funds back.

This service has gained much popularity.

Tax filing

Very recently Credit Karma has launched a tax filing service that enables it’s customers file tax and returns hassle-free and conveniently.

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We hope you liked the blog on how does Credit Karma work and have meaningful insights on how Credit Karma makes money. Share your views in the comment section below. For more interesting business models visit Ncrypted Blogs.

Kinjal Buddhadev
Kinjal Buddhadev
Specialized in eCommerce, marketplace, on-demand, startup, peer-to-peer, business model

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