What is our current credit score!? Does it make us scared just to even think about it or are we on track for an excellent score!? I strongly believe that managing our credit score effectively will make us rockstar adults! If we want to get on track with our credit, I would definitely recommend Credit Karma as a great credit managing tool. I have been using it for over a year now and I actually really love it. I wanted to share how I have been using it because it really makes everything so much clearer. If managing credit our credit score is a new concept, don’t worry. I will have us high-fiving our friends about our three magic numbers in no time. We can use Credit Karma at CreditKarma.com or use the Credit Karma app to easily view our credit score and anything that may be positively affecting (or hurting) our credit. The best part is that managing through Credit Karma is free. Plus, it does not count as an inquiry on our credit to use Credit Karma. I honestly don’t see a down side. Credit Karma is designed to be easy and user-friendly. Register with Credit Karma to get started.
Here are a few cool things we can do on Credit Karma:
See Our Score
In the overview section or as soon as we open the app, Credit Karma allows us to view our score for free from two out of three credit bureaus: Transunion and Equifax. The two scores may appear a bit different depending on what has been reported to each. When we sign in, we can easily see those three magic numbers. We all know how important we need a high credit score to get approved for loans and credit cards. If we wanna see what happen when I applied for a credit card with a high credit score, read my previous post: “Credit 101: Banks Treat Us Differently Based on Credit”.
How Do We Rank
It’s important to see how we rank in the eyes of the big companies. If we click on our score, we can also see a circle around our score for how many points we have and also what we need to get to the next level. This tool allows us to see if we have excellent, good, or poor credit. It shows us that 640 is okay, 700 is good, and anything above 750 is excellent. Also, it lets us know that any score below 580 is poor and needs improvement. There is also a graph next to our score letting us know how we have been doing over time. Did we accumulate more debt or open up a new credit card recently? We may see the graph headed down. Have we paid down a large balance? We may see the graph headed up in the direction we want!
Clearly See What affects our Credit
There are some key sections that we can view when we click on our score. Then, next to each category, it will tell us if there is a High, Medium, or Low Impact on our score. Here are the main categories:
Hard Inquiries: This shows anyone or any company who has checked our credit score and how many times. When we click on View Details, it tells us who exactly checked our credit if we have any inquiries (under Inquiry Details). It also shows us how many inquiries we should try to have and how our current inquiries may be affecting our credit score. Credit Karma advises that we keep this number under 1 or 2. Whereas 3, 4, 5 and so on will bring our scores down. The inquires usually will not fall off our credit report for about two years. Therefore, this tool shows us we want to be careful about opening too many accounts or allowing too many credit checks
at one time. Try to space our credit checks out between one and two years. Opening up a new loan, buying a car, renting an apartment, or opening a new credit card are some of the typical activities that require a credit check and a new inquiry on our reports.
Derogatory Marks: If we have any judgments, liens, or any accounts going to collections, then we may have derogatory marks in this section. Credit Karma guides us to have 0 negative marks against us for the best score possible. 1 mark may be okay but if we get into the 2, 3, 4 or more marks in the red, our score will be negatively affected. This is a good section to check as well just in case anyone steals our credit and has any derogatory marks on a credit card or other account they may have opened in our names. If there are any derogatory marks, we may be able to negotiate with the company causing the mark and get one or two removed. Call the customer service and see if there is anything they can do for us. Sometimes, we can greatly fix our credit by getting these marks forgiven or working out some sort of deal.
Credit Card Use: What’s awesome about Credit Karma is that it shows each credit card account and how much we have used of each account in this section. Even if we have not used a card in awhile, the credit account will still be here. The credit card use overall takes the total of all our credit card accounts balances and provides a percentage of how much we are using. For example, if we have two credit cards. One being $1000 and the other being at $1,000, the total accounts for all credit cards will be $2000. Now, if we have used $500 on each card we have put $1,000 on credit. So, our credit utilization will be 50% or $1,000 out of the $2,000 total. If we have extra money, try making an extra payment. Credit Karma recommends having under 30% utilization. 30%-49% is okay with high percentage (over 50%) of utilization may be impacting the credit score in a very negative way. Therefore, if we see the utilization high here, we are going to want to get some of the credit utilization down by paying down or off some of the balances.
Total Accounts: Credit Karma shows how many total accounts that are open. Car loans, home loans, credit cards, and even school loans show up here for example. This is the total debt that we have across the board. Credit Karma actually recommends having multiple accounts to show that we can be trusted by several different companies and in several situations. 11-21+ accounts are good. 1 or 2 accounts may not be the best. However, still be careful about opening too many accounts at once due to the inquiry marks that we talked about earlier. Also, keeping a lot of accounts is great but remember not to have any derogatory marks or late payments. Careful if opening too many accounts means we are not going to pay them or lose track of them. We may as well have less accounts.
Credit Age: This is a tough category because it takes so long to build the age of our credit. We are recommended to have an average of 9 years! Credit Age takes an average of all the ages of our accounts. So if we have one account open for one year and another open for 10 years, the average of those two accounts will be 5 and 1/2 years. So it’s important to not open up too many new accounts all at the same time. Also, keep old accounts open. I have received a letters in the mail that an old credit card account will be closed due to inactivity. I have made one small purchase on an old account just to keep it open because if it closes my account age average will go down drastically. An age of less than 2 years and up to four years is not very good. Having an average of 5-6 years is okay. Ultimately, having 7 to 9+ years of average credit age is going to be the best. There is not much we can do but keep our current accounts open, in good standing, and then just wait…9 or more years.
Payment History: Credit card companies want to know that we can be trusted to pay every time we get the bill. Every time we pay an account or a bill on time that payment is reported as a positive mark. This section of Credit Karma shows creditors how often we pay our bills on time. If we pay too late, then we may get a late payment mark on our credit score. The more late payments we get, the lower our percentage of paying on time. We ideally want this section to be a 100% payment on time history, which keeps our scores high. Where 98% is okay but 97% and below is poor and may negatively affect our credit. Just like derogatory marks, we can sometimes, work with out with our credit card companies. Ask if they can take off a late payment mark or two. It doesn’t hurt to ask.
We can actually easily see how many payments we made on time or not on any one particular account. If we look under Total Accounts and click on an individual account, for example Bank of America Credit Card or Chase Credit Card, it will show us all the years we have the account open and all the months that we have made the payments on time or not. A green dot means on time and a red dot means not on time. Under the account name it will also let us know if we are in good standing or not with that company.
Credit Score Simulator on Credit Karma
What really excites me about Credit Karma is that it has a simulation tool. It allows us to see what would happen to our credit score if we were to pay down some of our debt. If we click on credit card usage/utilization, it will tells us how much we should pay to get to the next level. In the app, it also will show you how our score would change if we click “Simulate my Score.” We type in how much we would dream of paying off and then watch our three numbers simulated by paying off some balance. This helps a lot if we are about to get approved and we need to be at a certain score.
Also, check under the Resources section and click on Credit Score Simulator for other financial actions that affect our credit. It shows what happens in other events like if we got a loan, opened a new card, went past due on an account, or had an account go into collections for example. This section definitely give us extra understanding on what can affect our credit score in a variety of ways.
Credit Card Approvals
Under the Recommendations tab and CreditCard tab, Credit Karma show us loans or credit card that we may get approved for based on our credit rating. This is one of the reasons that credit karma is free by offering us loans and credit cards from a variety of companies. Just be careful because this sections is more for selling us credit cards and loans and not necessarily to help us monitor our credit. I have found some useful cash back credit cards here. So if we are looking to get a new credit card, Credit Karma helps us research some of the best ones out there and also what chance we have of getting approved.
Credit Karma shows us more than credit score monitoring. Check under the Menu and Resources tab for other useful finance information for example:
-Identity Monitoring – the latest data breaches and if we may be affected
-Unclaimed Money – Any money that is unclaimed under our names! You might be able to get a check in the mail!
-Debt Repayment Calculator
-Simple Loan Calculator
-Mortgage Refinance Calculator
-Auto Loan, Auto Value, and Auto Insurance Rating
If we want to be rockstars at understanding our credit score and also monitoring our credit, I would highly recommend the free Credit Karma. I have learned so much from it about what actually affects credit and how I can do better. It’s such a great tool visually and I love the graphs and colors. It’s so exciting to get notifications on my phone or email from Credit Karma that my credit score went up. Also, equally important when it notifies me that my score went down because at least I can see why. Credit Karma provide great information and reminders to even credit veterans about credit age, utilization, payment history, and more. We will get on track with our credit in no time. If we are doing well, we can easily see how we can stay on track!
Check it out and let me know how it works for your individual situation. If you use something else to monitor credit, let me know in the comments! I’d honestly love to know if I am missing out on any other great credit monitoring tools!