Credit Karma has made a name for itself offering consumers free credit scores – not just a free trial, but completely free ongoing access, no credit card required. (See Why Credit Karma Is Free & How It Makes Money.)

It offers the Vantage 3.0 score (a model based on a collaboration among the three main credit bureaus) from TransUnion and Equifax. Knowing your score is important because it affects everything from your ability to get a loan to the mortgage rates you're offered, your credit cards approvals, even job or housing applications.

But Credit Karma doesn’t just shoot you the three-digit number and leave it at that. The tools on its website are cleverly designed with what psychologists call feedback loops – a key to keeping motivation up when you’re working toward a goal. You know those gold coins that hook you in a video game? That’s a feedback loop. The personalized feedback and information from Credit Karma act like a motivation engine for anyone who wants to improve their score and, in general, strengthen their finances. Here are five top Credit Karma tools, and what they can do for you, including the feedback you get.

1. Credit Score

Credit Karma members see their TransUnion and Equifax credit scores on their dashboard when they log in. Each score is updated once a week. Improving those scores can get you lower interest rates, a better credit card or make it easier to obtain a loan or buy a car.

  • The Feedback Loop: If you’re taking specific actions to improve your score, you’ll see the week-by-week results right here.

2. Credit Reports

Beyond your score, Credit Karma makes your full credit reports from TransUnion and Equifax available to you, however often you want. They’re also updated weekly; if you opt for email notification and credit monitoring, you’ll get an alert anytime there’s a change on your report. (You may also want to read Do I need to know all three of my credit scores?)

This is your credit history, and regularly monitoring your report can give you the the confidence you need to apply for that mortgage or it can reveal possible problems.

  • The Feedback Loop: In addition to the information, Credit Karma makes notations about issues to address: “Using over 30% of your limit,” or “Recently opened [credit card account].” Another important reason to monitor your credit report is to make sure there are no inaccuracies. Did you open that new account? Or is there something suspicious going on? After you request a correction, you can see whether it’s been made and feel more confident that you’re safe from identity theft for the moment.

3. Credit Factors

Credit scores were designed with bankers and statisticians, not the consumer, in mind. So the number alone won’t reveal exactly what to do to improve it. That’s where this next tool comes in.

Along with your credit report and score, you’ll get a customized analysis of six factors that went into it, with a grade for each factor. The Excellent, Good, Fair, Poor, Very Poor grades are Credit Karma’s, not official ones from the credit bureaus, but they’re based on data that Credit Karma aggregates from some 35 million members about what might affect your credit score and how it compares to national averages. With them, you’ll be able to see how certain actions – positive and negative – affect your credit. Here are the factors you can track:

Factors with High Impact

– Credit Card Utilization. The percentage of your credit limit that you’re using – your total balances divided by your total limit amounts.

– Payment History. The percentage of payments you’ve made on time for each account, indicating how reliable you are.

– Derogatory Marks. Accounts in collection, a bankruptcy, civil judgments and liens. (These all contribute to having an adverse credit history.)

Factor with Medium Impact

– Age of Credit History. The amount of time your credit accounts have been open, averaged across all your accounts.

Factors with Low Impact:

– Total Accounts. How many different loans, mortgages and credit cards are listed on your credit report.

– Credit Inquiries. Each time you apply for a loan or credit card the potential creditor makes a hard inquiry. (Checking your own credit report is a soft inquiry.) How many of these are there over the last two years? For more on this topic, see Credit Score: Hard Vs. Soft Inquiry.

  • The Feedback Loop: You’ll see how certain actions can affect your score. Let’s take credit utilization. Maybe you’ve maxed out all your credit cards, getting you a Very Poor rating. As you pay off your balances, you’ll see the percentage go down and this grade improve, producing a little zing of satisfaction each time. Do it enough, and your overall credit score will go up. You’ll be getting feedback at a more strategic level, too: Maybe you’re in a first post-college job and only have one credit card (affecting your Total Accounts grade). You may decide to apply for a second, which, with a steady paycheck, you know you’ll not use much and pay off in full every month. Its additional credit limit will lower your utilization rate.

4. My Spending

Members who connect their bank accounts and credit cards to Credit Karma can track their spending over time – making month-over-month comparisons or tracking by type of transaction. You’ll see where your money is going and what you’re spending the most on, illustrated in a colorful pie chart. You can also use it to review all your transactions in one place, checking for suspicious activity, unexplained fees or inaccurate charges.

  • The Feedback Loop: Does your spending reflect what you always say you want out of life? The pie chart can be a reality check. That massive portion of restaurant meals that weren’t even that memorable may redirect your focus to what your real priorities are, with the possibility that next month you see how that vacation savings pie chunk has grown – and feel very pleased with yourself.

5. Calculators

Credit Karma offers four financial calculators: one to estimate what price home you can afford, a simple loan calculator, an amortization calculator and a debt repayment calculator. (A popular credit score simulator that had let you test the effect of different actions on your credit score is offline being redesigned at the moment and, as of late January 2015, was expected back "in the near future.")

  • The Feedback Loop: The calculators’ what-if scenarios are the ultimate feedback loop, allowing you to quickly see how long it will take to get rid of a debt, or what house you can afford. How much equity will you have after 10 years if you have a 4.8% mortgage? (Interest is front-loaded on many types of loans.) Is it worth refinancing at 3.3%? What would you gain if you took out a loan to consolidate certain debts?

The Bottom Line

We all want to improve our finances but getting there from here can be hard. Credit Karma provides vital information with its free credit scores and credit reports. But beyond that, its tools, with their feedback loops – look how paying off that card upped my score! look at the house I can now afford! – help consumers educate themselves and motivate them to take positive actions for their financial health.

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