Credit Karma Doesn’t Hurt Your Credit Score, and Here’s Why

Credit Karma is a free internet service that lets people check their credit score. Because it is a self-initiated soft credit inquiry, checking your credit via Credit Karma does not harm your credit score. A soft credit inquiry differs from a hard credit inquiry in that it does not affect your credit record. Members may check their credit scores as frequently as they like and be certain that their credit will not suffer as a result. 1

Key Takeaways

• Credit Karma provides consumers with the ability to examine their credit record and score for free without harming their score.
• The service has no negative impact on an individual’s credit score since it counts as a self-initiated query, which is a soft credit inquiry as opposed to a hard credit inquiry.
• Soft inquiries have no effect on credit scores, however many hard inquiries in a short period of time may lower a credit score by up to five points each query and can remain on the record for up to two years.
• Credit Karma’s service is free, but it earns money by referring customers to loans and credit cards featured on its website.

How Credit Karma Works

Equifax, Transunion, and Experian, the three national credit-reporting companies, each provide consumers with one free credit report each year through the website annualcreditreport.com. Credit Karma offers free weekly credit report updates as well as free VantageScore 3.0(r) credit ratings from Equifax and TransUnion. 2 Experian provides a free credit report and FICO score on its website. 3

Credit Karma earns money when people apply for credit cards or loans via its website. Credit Karma gives lenders that advertise with it leads. It explains how it generates money and what information it collects on its website. 4 Credit Karma also assists customers in managing debt, tracking credit, organizing their budget, arranging loans, and keeping track of mundane duties such as amortization. 5

The website assists customers in disputing inaccuracies on their credit reports, lowering high interest rates, pacing their mortgage, calculating how long it will take to pay off credit card debt, and determining interest rates and conditions for various loans. 6 Intuit, the creator of TurboTax and other tax software, paid $8.1 billion for Credit Karma in December 2020. 7

Why Credit Karma Won’t Hurt Your Score

Credit Karma analyzes your FICO score on your behalf, resulting in soft queries. Soft inquiries vary from hard inquiries in that they do not affect your credit ratings. Multiple hard inquiries completed in a short period of time may deduct up to five points each inquiry and can remain on the record for up to two years.

Credit bureaus often subtract points when a person has a limited credit history or just a few accounts. Multiple hard inquiries are seen by credit agencies as indicating that the individual may be a high-risk borrower. The credit bureaus think that the individual is anxious for credit or has been unable to get credit from other creditors. According to MyFICO, those who have many hard inquiries on their credit reports are eight times more likely to declare bankruptcy than people who have no bankruptcies on their records. 8

Hard Inquiries vs. Soft Inquiries

When customers apply for a mortgage, vehicle, student, business, or personal loan, or a credit card, they make a hard inquiry. They also occur when a credit limit increase is requested. While one or two hard inquiries per year may have no impact on credit scores, six or more hard inquiries at once may be detrimental. 8

Soft inquiries, on the other hand, revolve on investigations, such as credit checks conducted by firms that sell products or services, background checks conducted by employers, being pre-approved for credit card offers, and reviewing personal credit scores. Soft enquiries may also come from firms with whom customers already have accounts. The majority of these enquiries do not result in financing decisions. They are considered promotional and conditional, and hence have no bearing on the individual’s score. Soft inquiries may be conducted without the individual’s consent and, depending on the credit agency, may or may not be reflected on the credit report. 8

Other activities, such as applying for a rental apartment or car, obtaining a cable or internet account, having your identity verified by a financial institution, such as a credit union or stock brokerage, or opening a checking account, may result in a hard or soft inquiry, depending on the credit card bureau or type of institution that initiates the inquiry. Credit Karma seeks the information on behalf of its members, therefore it is a soft query that does not affect the member’s credit score. 9

The Bottom Line

Credit Karma, like comparable companies such as Credit Sesame and MyFICO, promotes easy-to-read credit reports, customised score insights, and free credit monitoring to assist users in detecting possible identity theft, among other services. 10 While the service is provided free of charge to users, Credit Karma earns money when those customers apply for loans and credit cards promoted on its website.

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