Credit Karma is a free online service that allows consumers to check their credit score for free. Checking your credit on Credit Karma does not hurt your credit score because it’s a self-initiated soft credit inquiry. A soft credit inquiry is different from a hard credit inquiry in that it leaves your credit report untouched. Members can check their credit scores as often as they wish and trust that their credit won’t take a hit.

Key Takeaways

  • Credit Karma allows users to check their credit report and score for free, without affecting their score. 
  • The service doesn’t hurt an individual’s credit score because it counts as a self-initiated inquiry, which is a soft credit inquiry—versus a hard inquiry. 
  • Soft inquiries don’t hurt credit scores, while several hard inquiries over a short period can drop a credit score as much as five points per inquiry and can stay on the record for upward of two years.
  • Credit Karma’s service is free, but it makes money when users sign up for loans and credit cards advertised on its website.

How Credit Karma Works

The three nationwide credit-reporting agencies, Equifax, Transunion, and Experian, each allow users to access one free credit report annually but require them to pay for additional copies. Credit Karma provides free weekly updated credit reports and scores. But, don't let the word “free,” fool you, Credit Karma makes money when users sign up for credit cards or loans that it offers on its website. 

Credit Karma provides leads to lenders that advertise with it. It discloses how it makes money and the information it gathers on its website. Credit Karma also helps users manage debt, keep track of their credit, organize their budget, straddle their loans, and keep track of routine tasks, such as amortization. 

The service helps users dispute errors on their credit reports, reduce high interest, pace their mortgage, calculate how long it would take to pay off their credit card debt, and determine interest rates and terms for different loans. As of Nov. 2019, Credit Karma had over 100 million members and 700 employees.

Why Credit Karma Won't Hurt Your Score

Credit Karma checks your FICO score on your behalf and therefore conducts soft inquiries. Soft inquiries differ from hard inquiries in that they leave your credit scores untouched. Multiple hard inquiries done in a short period of time can knock off as much as five points per inquiry and can stay on the record for upward of two years.

Credit bureaus tend to deduct points, particularly if the person has a short credit history or only a few accounts. Credit bureaus interpret multiple hard inquiries as showing that the person may be a high-risk borrower. The bureaus suspect that the person may be desperate for credit or was unable to get the credit needed from other creditors. MyFICO reports that people with multiple hard inquiries are eight times more likely to declare bankruptcy than other people with no bankruptcies on their reports.

Hard Inquiries vs. Soft Inquiries 

Hard inquiries occur when people apply for a mortgage, auto, student, business, or personal loan, or for a credit card. They also occur when someone requests a credit limit increase. While one or two hard inquiries a year may hardly dent credit scores, six or more hard inquiries at once can cause harm. 

Soft inquiries, on the other hand, pivot around investigations, such as credit checks made by businesses who offer goods or services, employer background checks, getting pre-approved for credit card offers and checking personal credit scores. Soft inquiries can also be inquiries made by businesses with whom people already have accounts. Most of these inquiries are not lending decisions. They’re considered promotional and conditional, and therefore, won’t affect the person's score. Soft inquiries can be done without the person’s permission and may, or may not, be reported on the credit report, depending on the credit bureau.

Other activities, such as applying to rent an apartment or car, getting 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—this depends on the credit card bureau or type of institution that instigates the inquiry. Credit Karma requests the information on its member’s behalf, so it is a soft inquiry and therefore does not lower the member's credit score.

The Bottom Line

Credit Karma, in line with similar organizations such as Credit Sesame and MyFICO, advertises easy-to-read credit reports, personalized score insights, and free credit monitoring that help members spot potential identity theft, among other options. While the service is free to users, Credit Karma makes money when those users sign up for loans and credit cards advertised on its website.