Thin Credit File? Credit Karma Wants to Help, For Free!
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Thin Credit File? Credit Karma Wants to Help, For Free!

EPF Last Update: September 28, 2018

Credit Karma gives borrowers a way to check and track their credit profile at no cost. The company banks off referral earnings, not up-front charges. This means you have access to free credit reports and scores through the Credit Karma website. Even better,the credit reports are now available once a week at no cost.

In April of 2015, Credit Karma rolled out a new credit monitoring service for borrowers with “thin” credit files. This makes it possible for these borrowers to get free tracking services, which makes it easier to build and repair credit.

How Does Credit Karma’s Thin File Tracking Help?

Credit Karma made a blog post announcing their new credit monitoring program for thin file borrowers. This post goes into detail of what a thin file user could expect when using their free credit monitoring service.

The free Credit Karma service gives thin file users access to their full credit report. With this comes an explanation of why the credit reporting bureaus could not calculate your score. Their tracking service takes it a step further by giving you specific advice to build or repair your credit file.

Thin file borrowers also get access to many different credit-related tools. This includes credit line recommendations, interest rate calculators, and personal budget trackers. These are the features that are typically available to Credit Karma subscribers. You are getting the full value of a Credit Karma account, plus tailored help to get you out of the thin file rut.

Credit Karma also showcases different credit cards and loans. These offers are set to fit your needs, and your credit profile. You will have a chance to see what different credit lines work for you, when borrowing with a thin credit file. This makes it easier to plan out the steps, and to actually take them, as the entire route to credit success gets handed to you.

Do You Qualify for Thin File Tracking?

15 million Americans qualify – are you one of them?

If you received a response from the credit reporting bureaus claiming you can’t get a credit score due to a thin file, then you qualify. If you haven’t tried to get a credit score, and your report is empty, you should still qualify.

Many types of borrowers can be guilty of having a thin credit file. Credit Karma suggests that most will fall under one of these groups:

  • Borrowers with little to no credit history at all,
  • Borrowers who just moved from another country,
  • Borrowers who are mistakenly reported as dead,
  • Borrowers who have a split file, often from moving a lot, or,
  • Borrowers re-establishing credit after closing old accounts.

Extraordinary circumstances might influence a “thin file” alert on your credit report. It’s imperative to make a request to the credit reporting bureaus for your report and score. You will always receive a credit report, even if you have nothing of substance to show. But, you will receive notification that you have a “thin file” if there is insufficient data to calculate your score.

Are There Any Downfalls?

This is still a new program, and we have yet to see it’s full potential. Credit Karma might advance the services offered here. There are many things they can do to assist thin file borrowers, and it’s not just about triggering the bureaus to calculate a score.

The biggest concern is whether the free report matches what lenders see. This depends on whether the report you pull through Credit Karma is up-to-date with the report pulled by the lender. It also depends on which credit rating product the lender uses. For example, a FICO score can differ a lot from a VantageScore 3.0 rating. Each get calculated in a different way, and the accuracy of what you see comes down to how close the calculation is to the one the lender uses.

One of the main reasons this happens is because lenders might pull your report from a different reporting bureau. But, Credit Karma no longer just relies on TransUnion. This means you can get your report and score from both Equifax and TransUnion. As a result, it’s a slim chance that any major difference will get noticed between what you and the lender can see.

Which Credit Score Does Credit Karma Give You?

Credit Karma made many changes.

While the biggest change was the implementation of Equifax reports and scores, they also flipped the script by changing which score they show. This further supports the accuracy of the credit rating you see. Thus, increasing the chance of it lining up with what a lender will see.

Now, Credit Karma does not just rely on TransUnion’s TransRisk New Account credit score. The company also supplies users with their rating through the VantageScore 3.0 rating product. This is a huge transition, as it goes from focusing on a 1-bureau rating calculation, to taking from all three bureaus.

The VantageScore 3.0 rating you receive is the accumulative calculation of your credit score. It takes information from Equifax, Experian, and TransUnion. This serves as the closest estimator for any borrower, and it compares well against the FICO score.

Lenders often use this credit rating product to qualify borrowers for sub-prime loans. Before 2013, the score would range from 501 to 990, but now it ranges between 300 and 850.

The 3-bureaus use the following metrics to calculate your VantageScore 3.0 credit rating:

  • Your recent credit (30%)
  • Your payment history (30%)
  • Your credit utilization rate (20%)
  • Your credit balances (10%)
  • Your credit depth (9%)
  • Your credit availability (1%)

This makes for a great way for thin file borrowers to split into the credit world. The VantageScore 3.0 rating focuses on supporting their goal to improve credit now. It’s not so much about what’s weighing you down from the past, rather it’s about how you want your score to change.

While your FICO score might be the most respected measurement of your credit strength, it’s not going to help if you have a thin file. There’s too much focus on not carrying a heavy credit balance. While the VantageScore only factors 9% for credit balances, a whopping 30% of the calculation factors what you owe now.

New credit only factors 10% on a FICO score, but it’s 30% for the VantageScore. This means that new borrowers will qualify easier under the VantageScore metrics. So, the accuracy of your rating through Credit Karma is more accurate now than it was last year.

How to Use Credit Karma’s Thin File Service

Using Credit Karma is easy.

Here’s a quick step-by-step guide:

  1. Create an account, fill out your personal info, and verify your identity.
  2. Get your free credit score and full credit reports from Equifax and TransUnion.
  3. If desired, get your auto and home insurance scores.
  4. Try out the credit simulator, which exemplifies cause and effect.
  5. Sync your bank accounts and credit lines for greater success.
  6. Consider credit building recommendations, like credit cards and loan consolidations.
  7. Track your credit utilization rate, dispute any credit report errors, and more.
  8. Take advantage of the many tools they offer and keep working hard!

Credit Karma also gives an in-depth guide to using their services.

Why Credit Karma?

Many credit tracking services exist, but few offer their help at no cost. Credit Karma gives credit monitoring solutions to over 40 million Americans. This makes them one of the top players in the credit tracking industry.

Now, some might be set off, because they think Credit Karma is not a free service. The truth is, just as their site states, every single part of what they offer is free of charge. They earn money through referring you to offers. In fact, as mentioned earlier, you can now even get a free credit report once a week through Credit Karma.

The benefits of a credit monitoring service are extensive. You get complete control over your credit information, and insurance over identity theft threats. Repairing your credit will be easy, as you can watch your progress and see the effects of changes to your report. In entirety, this is a must-have for any borrower.

Free Credit Services Like Credit Karma

Some worry about Credit Karma because of the bad aura that surrounds free credit report businesses. This comes from a long history of companies dressing themselves as free. But, it’s often just a trick to get you to join. Most of these free credit service providers end up charging after the free trial period is up.

Credit Karma is 100% free at all times. That’s the difference.

Not sure if Credit Karma is right for you? Take a look at a comparison of free credit report websites to see what else is out there!

Elite Personal Finance

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