If you are an adult then you know how important it is to keep track of your credit score. This is because your credit score will play a crucial role in the future. It doesn’t matter how small or big the loan you want, the financial institutions you approach to borrow money will only look at one thing if they were to lend you money. That is your credit score. Because this is the score that will let them know how good you are at paying your credit on time. If you have a high credit score then the financial institutions will give you a loan more easily. This is because they will know that you are good at paying your debt. No one would want to lend money to someone who is unable to pay it back in time. Would you lend money to someone like that? Definitely not.
This is because banks like people who pay their credit in time and you can easily understand why. Even people who are just starting their care must understand the importance of their credit score. Some millennials are just spending as much as they want and putting most of it on their credit card. They don’t understand how much it is going to affect their lives in the future if they don’t pay that back in time. Even if you want to get a new credit card your credit score matters. So it is better to keep track of your credit score. Tracking your credit score will help you control your expenses and limit the amount you spend on your credit card. The best way to do this is by installing an application that allows you to track your credit score for free. That application is Credit Karma.
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What is credit karma?
Credit Karma is an American financial tech business that was founded in the year 2007 by Kenneth Lin. It was founded so that it can help people to keep track of their credit score more efficiently. It provides users with their free credit reports and scores. All of these reports and scores are collected from the national credit bureaus such as Equifax and TransUnion. If you use Credit Karma then you will be able to see all the minor changes in your credit score. Not only that you can even inquire if you feel that your credit report or score has any errors. The best thing about this platform is that it not only allows you to track your credit score but also provides you with the tools to improve it. It does things like offering financial recommendations to an individual based on their credit score.
Since the day if it’s founding Credit Karma has come up with various tools to help its users monitor and improve their credit score. One such tool is My Spending Tool which allows users to monitor their expenditure. Credit Karma allows you to check your transaction history, loans, and credit card balances. To help the users understand their tools better Credit Karma has blogs and forums where you can learn about the experiences of other users who used those tools. In 2016 the company also created a Credit Karma tax which is an online tax preparation service. This service allows people to file federal and state taxes through their platform without any cost. Till now Credit Karma has acquired many companies. It has also worked with startups like Upromise that intended to help students to pay their student loans. Currently, Credit Karma has more than 100 million users.
How does Credit Karma work?
If you are an adult then by now you must have understood that your credit score is not just a number but an indicator of how financially secure your future is. It plays a vital role when you require a new credit card, housing loan, and many other things. It is very important that you review your credit score regularly. By doing this you will have an idea of how to be financially independent given your current position. The best thing about using Credit Karma is that it provides you with your credit scores and reports for free. Everyone should have free access to their credit reports and Credit Karma believes this. Not only that but it also makes the process very easy. If you want to use it all you have to do is sign up to their website using your basic information and nothing else.
You don’t even have to give your credit card details to sign up for their platform. A person can look up their credit score any number of times they wish without paying a single penny. If you do not understand how credit scores work then no problem Credit Karma also helps you in understanding what it is. Apart from this Credit Karma also provides a lot of free services that help its users. As a user, you will receive personalized suggestions on how to improve your credit score.
Business model of Credit Karma
If you look at the business model of Credit Karma is quite simple as it does not involve too many types of people. The only people that Credit Karma serves is the financial institutions and their users. So let’s see how this business model is supported by two groups of people.
Users
Without users, any kind of platform is just an idea. An idea can be wonderful but it will not be a success unless people accept it. By looking at the track record of Credit Karma one can easily say that it definitely is loved by the users. And why won’t they love it? It has given them all the reasons to use their platform. Credit Karma gives them access to their credit scores and reports in an instant. They can look up their credit any number of times they want to. Additionally, it also provides them with lots of other services and tools. The best thing about this is it does all of this for free. Why would anyone not like such a wonderful thing if it is for free? Not only that but they can also search for loans that suit their credit score.
Financial Institutions
Financial institutions are the ones that pay to use the reach of Credit Karma. With over 100 million users in the US, the UK and Canada Credit Karma have a user base that is very useful for all of the financial institutions present in these countries. If you observe that financial institutions are more than happy to offer you a credit card if you don’t have one. This is because they want you to spend more. So if they give you a credit card you will be able to spend more when you don’t have money. While paying back the money you will be returning it with added interest. This is one way in which a financial institution makes money.
There are many such ways as giving loans through which the financial institutions make money. But they have to put in a lot of effort to reach out to those people and witness success. But here is a platform that has millions of users that belong in all credit ranges. So it has customers for these financial institutions that have all kinds of products for these people. This means that they will easily be able to reach out to the customers with a product that suits their credit score. Credit Karma provides these financial institutions with a platform where they can promote their products and services.
How does Credit Karma make money?
Since the platform is completely free there are only two ways in which the platform makes money. That is by advertising the products of financial institutions and by referrals.
Advertisements
This is the most basic way in which an application or a website earns money. Credit Karma is very smart as it only advertises the products and services of financial institutions. This is great because the platform itself is about helping people understand their financial situation. This allows it to advertise all kinds of products and services from financial institutions. But the great thing about this is that it does not show ads randomly. Credit Karma believes in targeted advertising. This means that you will only see ads about the products that you may like or get depending upon your credit score. This also helps the financial institutions as their advertisement will be shown to potential customers.
Referrals
As mentioned earlier financial institutions advertise their products on Credit Karma. These advertisements are specifically targeted towards individuals. Some people may get loans or other things through these advertisements. If someone signs up for a service then the financial institutions to which they signed up pays a referral fee to Credit Karma. There are many services such as credit cards, travel cards, personal loans, home loans, car loans, etc. Whenever a person signs up for these services Credit Karma receives a referral fee.
Conclusion
This is the business model of Credit Karma. The great thing about this application is that it does not sell the information of its users to any company. Use Credit Karma if you want to keep track of your credit score for free. Check out other interesting business models such as the business model of Oyo rooms on Postling.
