Increase Your Credit Scores With Credit Karma
Whether you are purchasing a home or car or have credit cards, your financial standing impacts the interest rate and terms you'll receive.
Excellent credit scores allow you to get the best deal when making significant purchases. It makes sense to do whatever you can to improve your credit scores.
But how do you do it easily? There must be a simple solution. There is, and it's called Credit Karma.
Credit Karma is a free service that allows its members to improve their credit standing. The result is better loan terms when buying a house or other substantial purchases.
Let's look at everything you need to know about Credit Karma.
What Does Credit Karma Do For You?
Credit Karma does a few things, including providing you with the knowledge to make the right credit decisions. So many people make mistakes regarding their finances.
For example, would closing a credit card help or hurt your credit score? If you don't know the answer to a question like this, Credit Karma can help.
Instead of guessing and doing something to hurt your credit, you'll get the timely advice you need.
The other significant thing Credit Karma does for you provides your credit scores.
The credit scores and reports provided by Credit Karma are based on TransUnion data as well as Equifax. These are two out of the three major consumer credit bureaus.
By using Credit Karma, you'll have the constant knowledge to make the right credit decisions. Over time your credit scores will rise by following their advice.
Is Credit Karma Accurate?
One of the most common questions is whether Credit Karma is accurate.
The scores provided by Credit Karma should be accurate based on the info provided by those bureaus. It is essential to remember the scores may not match other reports and scores found elsewhere.
That does not mean the information provided by Credit Karma is not accurate. What they provide is accurate!
How Does Credit Karma Work?
Credit Karma is a highly intuitive experience. Your information must be entered on their website – such as name, social security number, and any additional details where applicable – before your credit reports are accessed for calculation purposes.
Afterward, all of that data is available for viewing. The login is in the upper right corner to access the site once you are a member.
Why Are Credit Scores at Credit Karma Different From Others?
Credit Karma gets your VantageScore 3.o credit scores from Equifax and Transunion. Getting different credit scores from the credit bureaus is not uncommon.
It happens because the information they have on you differs. There are significant reasons you will see differing scores include not all lenders reporting to the credit bureaus, different credit scoring models, and human errors.
Some lenders may only provide information to one or two bureaus rather than all three. Furthermore, there is often a lag between when the bureaus update your reports; this could lead to differing credit scores and credit reporting.
Each model can assign different weightings to your credit history elements, thus resulting in differing scores even if they all originate from a single set of reports.
Lastly, credit report mistakes are not uncommon. One bureau could have everything correct, and the others may not. The amount of credit report errors reported since 2015 to Transunion is more than 10 billion.
Yes, you read that correctly!
If You're Buying a Home, Know That They Are Not FICO Scores
When mortgage lenders are looking at the viability of lending money to a potential home buyer, they use FICO scores. It is essential to note that Credit Karma does not use FICO scoring.
As mentioned, Credit Karma uses Vantage 3.0 credit scores from Equifax and Transunion to provide your financial standing.
Your FICO score and Credit Karma score will likely differ. This is why you see people online complaining that Credit Karma is inaccurate. Those folks are wrong.
What they provide is accurate. It just doesn't match FICO. So, when you are in the market to purchase a home, don't rely on Credit Karma to provide you with what lenders look at.
Improve Your Credit Score to Get The Best Mortgage Rates
A good credit score is vital for getting the best mortgage interest rates. A good credit score is typically considered one above 700.
Mortgage lenders look at your credit score to determine the risk they take when lending money. The higher your credit score, the lower the risk that you will default on the loan.
When lenders examine your credit score, they also research your debt-to-income (DTI) ratio. This is the amount of debt you have compared to the amount of income you have coming in.
The lower your DTI ratio, the more likely you will get a reasonable mortgage interest rate. Lenders see you as having more money available to repay your loan.
It is crucial to focus on improving your credit score and DTI ratio if you want to get the best mortgage interest rates.
Pay your bills on time, keep your credit card balances low, and pay off any existing debt.
These steps can help you improve your credit score and DTI ratio and get you better mortgage interest rates.
Credit Karma can help you do what's needed by providing the resources to make the best decisions. Whether you want to buy land to build a house or purchase a resale, Credit Karma can help. Best of all, Credit Karma is FREE!
What is Credit Karma Tax?
Credit Karma is not only a financial improvement engine, but they also offer tax services. You can use the Credit Karma Tax software to file your taxes.
Free software isn't suitable for everyone and may lack some features which could be necessary if your taxes are more intricate.
They offer several choices supporting acquired situations, such as independent contractor earnings and landlord payments. This comprehensive service caters to most taxpayers' needs.
Are There Any Alternatives to Credit Karma?
Credit Sesame is another very similar company to Credit Karma. While there are similarities, there are also differences too.
You can see a full comparison at RISMedia in Credit Karma vs. Credit Sesame.
Final Thoughts on Credit Karma
If purchasing a home is one of your goals in the coming years, get on the credit improvement train now! Let Credit Karma help you reach your goals. You will be glad you did!
Did you enjoy this advice on improving your financial standing with Credit Karma? See other real estate articles on NewsBreak for more timely tips and advice. Bill often writes about general real estate, mortgages, finance, moving, and home improvement.