Credit Karma offered truly free credit scores when many sites were advertising such services but sneaking in fees. The company also built a service that helps members dispute and remove errors from their credit reports, and says it has made $8.4 billion in corrections so far. This year it began helping members look for unclaimed money, such as balances in old bank accounts or rebate checks that were never cashed. It says it found $100 million in two months.
The company has worked to win consumers’ faith in less obvious ways. For example, Mustard’s team vets lenders before they’re allowed on the site, banning payday lenders and the like. You’ll still find plenty of debt products there charging high interest rates—if you have a lousy credit history, they may be your only option. But for short-term, high-interest loans, Credit Karma requires banks to take extra steps to make sure members can pay the money back, by going beyond credit scores to verify borrowers earn enough income to handle the loan.
“You don’t want to put them in a cycle of debt,” Mustard said.
The strategy appears to be working. The company added 70 million of its 75 million members over the last five years, it says. By now, about half of Credit Karma’s new members come from word of mouth, Lin said.
The new tax-filing service is a bid to lure even more members while collecting high-quality data on them. Completely free, including the filing of state returns, it’s a direct challenge to the country’s two dominant tax preparers, H&R Block and Intuit’s TurboTax.
About a million taxpayers filed with Credit Karma this year.
Lin, 41, admits the online service wasn’t as user-friendly as he would have liked. “Each successive year you’re going to see a marked improvement in the product,” he said. “We’re in it for the long haul.”