How Does Credit Karma Make Money?

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What is Credit Karma?

Credit Karma is a credit score and report tracking company that offers many services for free. Credit tracking is widely used in developed countries for many things, such as loans, credit card applications, apartment rentals and even hiring. Many people are not aware of credit scores and such things before it is too late. For example, maxing out that first credit card, defaulting on a first car loan payment or even being late on the rent while in college can all have an effect on a persons credit score. These are not things people are taught in school, or even in most cases by parents. Credit Karma is aware of this and they work hard to keep people informed of their financial lives.

How does Credit Karma make money?

Credit Karma uses a few avenues to make money. The first way they make money is to make credit card offers to people with matching scores. When a customer is approved for a card, they get a small commission for driving the customer to the card. They also use algorithm driven targeted advertising and lead generation for companies in addition to credit card offers. The trick, of course, is having enough users to make the model profitable.

Recent developments

Credit Karma recently added a tax preparation and filing service. Once again, these services are free to users even if you are self-employed. The advantages to the consumer here are: there is no up-selling to the next best tax-return analysis, there are no hidden fees and there are no charges for state filings. The software is said to work much like the other big accounting houses. The only downside is that there are no experts at your fingertips to ask for advice. The fact that it is completely free makes up for that.

Fun fact

Kenneth Lin is the founder of Credit Karma, he also founded Upromise, which is a savings account of sorts where one can contribute to a child's future education needs. As many tech startups, Credit Karma is no different and was created to solve a problem. Lin became discouraged at the cost of getting credit reporting and scores. So he created the company to take care of this problem for himself and many millions of other people.

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