Some consumers have asked if using Credit Karma to periodically monitor their credit score has any effect on that score. It is a reasonable concern given that there are things you can do to reduce your score. Fortunately, the answer is no – you won’t hurt your FICO or VantageScore credit scores by checking them through Credit Karma.
Understanding Credit Checks
To the layman, all credit checks are the same but this is not the case. The two most common types are hard inquiries and soft ones.
Hard Inquiries
A hard enquiry arises when a lender pulls your credit report in order to consider your application for a new credit. Some instances that may lead to a hard inquiry include applying for a credit card, mortgage, auto loan, or an apartment.
Hard inquiries can cause a small drop in your credit score depending on the number of inquiries made within a short period. This is because, finding a lot of credit at a go may be seen by creditors as having more risk. But, most of the hard inquiries have little effect after a year.
Soft Inquiries
A soft inquiry is when your credit is run but has no relation to a credit application hence it does not impact the score at all. Soft inquiries are usually conducted by employers, insurance firms, landlords, or even by yourself if you have subscribed to credit monitoring services. Soft inquiries include checking your own score and report.
Why Credit Karma Doesn’t Lower Your Scores
At the Credit Karma, you can get your credit scores and credit reports from TransUnion and Equifax for free. They also provide credit monitoring features such as score estimators. However, it is crucial to understand that Credit Karma does not pull credit scores that can reduce them in any way, but it only performs soft credit checks.
They are able to offer this free access as their business model is based not on lending but on offering recommendations. The fee you are charged when you register for Credit Karma is to provide you with customized offers for credit cards, loans, and other financial services. The site that offers personal finance tips earns revenue when the consumer clicks or subscribes through these offers.
This is because Credit Karma does not request a credit report for the purpose of extending credit to you but relies on it as a background check and only makes a soft inquiry. Worry not, Credit Karma will not affect your credit scores every time you click the login button.
The Myths About Credit Checks On Credit Karma
Myth: Credit Karma reduces credit scores since they make hard inquiries each time one checks their credit.
Fact: Credit Karma only pulls credit reports for pre-approval, which means it conducts soft inquiries that do not hurt scores.
Myth: Merely having too many accounts that reporting your credit history in general is depleting your score.
Fact: There is nothing wrong or damaging about having a lot of soft inquiries even though many hard inquiries are a sign of credit risk.
Myth: In general, Credit Karma shares the user data with permission but offers recommendations that violates the user’s privacy.
Fact: Credit Karma, for instance, lays down its business model in a very clear and concise manner and the user agrees to receive customized recommendations in exchange for free services.
When Credit Checks Matter Credit Karma
While simply accessing your credit data is harmless, a few things can lead to hard inquiries and potential points off your score:While simply accessing your credit data is harmless, a few things can lead to hard inquiries and potential points off your score:
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Agreeing to be pre-qualified for credit cards or loans
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Choosing to click to check if you are pre-approved with some lending partners
- Applying for an account or a loan using Credit Karma’s marketplace
The initial check performed by the backgrounds check company is always a soft check, however, following up the additional credit offers that they provide would also resulted to a hard credit check once you actually apply for it. The hard inquiry and any new credit line may cause small, transient changes to one’s credit scores.
Inquiries from Other Sources which have been categorized as hard
It is important to understand that Credit Karma itself will not make any hard inquiries and thus lower your credit score. However, some of the banks and financial institutions post offers on the site that can have an effect on your credit if you apply. When an action might trigger a hard inquiry, reputable services will always let you know.
Your Credit Karma activity is comprised in a safe way, that is, only for viewing purposes. However, in other contexts, such as a credit card offer from Chase Bank, both soft and standard hard inquiries would be conducted and the normal effects of establishing a new credit account would occur.
How Often Should You Check Credit Karma?
As long as the checking of your credit management accounts on Credit Karma does not lower your scores through conducting hard inquiries, then there is no harm in accessing your data as frequently as you desire. Ideally, it should be checked at least once every few months to ensure optimum protection against identity theft. Thus, constant monitoring for any suspicious activity and a fast response to errors can help maintain good scores. Otherwise, the choice is relegated to matters of individual convenience. People who are planning to apply for a mortgage soon or those who are working on rebuilding their credit can access this information more frequently so that they can monitor change over time. The cost-conscious customers who do not pay much attention to the quality of food and other products might find quarterly or semi-annual examinations to suffice most of the time. Again, it depends on your discretion and financial capability.
The Takeaway
Using Credit Karma to monitor your credit scores, reports, and analysis will not lead to a hard inquiry or a negative impact on your credit. You can log in at any time you need to check your detailed credit history and get the scores based on both the VantageScore and FICO. This can put you in a position to address problems when they are small and develop the knowledge to make right financial decisions. Just be careful that agreeing to have companies personally recommend new credit accounts to you can result in hard inquiries from other financial institutions at some point in the future once you actually apply.
