Company Spotlight: Credit Karma

By Andrew Sieglin

Credit Karma is a fintech corporation that offers free credit score reports and evaluations through two major credit bureaus, TransUnion and Equifax. Through the company, clients are able to access their credit at all times and understand their credit score given certain contexts.

The concept of credit is an integral component of personal finance for most adults. Having a bad credit score is problematic, and someone with bad credit can have issues with loans, payments, and how banks/investors perceive them. Companies like Credit Karma exist and thrive because they offer a service that most adults need in order to stay up to date with their credit.

Listed by Inc. as one of the most valuable fintech startups in the world, Credit Karma has been so successful that it is currently valued at nearly $3.5 billion. But how and why is Credit Karma so successful in a global market that is oversaturated with more corporations targeting the same issue of credit? Part of the answer is found within the concept that Credit Karma offers some of their main services for free, which is a component of their stated mission.

The concept of transparency is also very important for Credit Karma, which is the extent that clients and investors can understand financial information about the company. Transparency ameans a great deal to clients and investors, because the more the transparency, the less “price volatility” that will exist in the market. Credit Karma is all about stability, and with high levels of transparency, Credit Karma has developed the reputation as a safe and reliable source for credit information and analysis.

Part of the rationale for Credit Karma’s success lies in their business model. Credit Karma is able to make their services free by holding advertisements on their website, app, and database. However, these advertisements are not arbitrary, rather, they are customized for each client and investor based on their financial preferences and history. The advertisements are of financial companies, that aim to network their own individual brands through Credit Karma. When clients input their financial history based on previous payments, loans, and transactions, Credit Karma uses several algorithms to provide advertisements of companies that are specifically designed to help clients with the specific issues they may have. Thus, Credit Karma is able to hold a “win-win” business model by satisfying their clients’ needs, the other financial entities’ desire for exposure, as well as Credit Karma’s own financial margins.