Five Questions With Ken Lin, CEO of Credit Karma
Credit Karma, a web-based credit and financial management service for U.S. consumers, was one of the first sources of VantageScore credit scores provided directly to consumers. Delivering scores through its website, CreditKarma.com, the company, founded in 2007, has been in the news recently, thanks to an infusion of $85 million in venture funding from an investor group led by Google Capital. In light of that investment, The Score posed five questions to Credit Karma CEO Ken Lin to learn more about Credit Karma, its recent history, and its plans for the near future.
What trends are driving consumers to have greater interest in their credit profiles?
Over the last decade, consumers have been taught that credit profiles are a key metric in financial health and that that metric has a tendency to be inaccurate. The message is resonating through increased press coverage, government regulation and even data breaches, which increase the need for access and monitoring for credit files. As awareness has increased, the consumer demand for this data has as well. Credit Karma has met this need by providing truly free access to data and making it easy to understand.
How does Credit Karma help educate consumers about their credit scores and what impacts those scores?
There are three ways in which Credit Karma helps educate consumers: by providing free access, insight and education.
First, Credit Karma gives consumers free access to their credit scores and credit report data. But knowing your score is just the beginning — the “what.” Credit Karma also provides insight into the “why” through various tools. For instance, our Credit Report Card shows you the specific factors influencing your score and where you stand. Lastly, we provide information and education around basic and complicated credit concepts (the “how”) by breaking things down into easy-to-understand explanations.
What are the most popular tools and features offered by Credit Karma?
The Credit Report Card is one of the most popular, because it breaks down the factors that determine your credit score. In addition, the Credit Score Simulator, which creates custom score simulations based on the consumer’s credit file, is also very popular. The common thread throughout both of these features is that consumers want education and transparency on how credit scores work. We can’t ask consumers to work on something they don’t understand.
Other popular areas of Credit Karma are our community-driven features, like our Credit Advice Center and financial product reviews. In the Credit Advice Center, our members can ask and answer questions related to credit and finances and learn from others’ experiences. We want our members to feel empowered to make the most informed financial decisions, so we also provide a forum for them to review the financial products they have, like credit cards, bank loans, etc.
In what ways is technology having the greatest impact on the credit and loan marketplace?
We see two key trends developing that are slowly changing the lending space. First, technology is creating efficiency in targeting, ease in application and more consumer certainty. For example, technologies like Credit Karma can greatly improve approval rates while also reducing the amount of information needed on an application. Most importantly, the technology can provide more certainty on approvals, which is so important to any consumer with less-than-pristine credit.
Secondly, we have seen the technology improve general understanding among consumers about how credit works. This in turn has created a more educated consumer who values good credit. Through numerous studies we have seen that Credit Karma users are 20-30 percent less likely to default on a matched credit score basis than their counterparts who don’t use a service like Credit Karma.
In an article about the recent investment from Google Capital, you mentioned you plan to introduce products that are going to be “disruptive.” What does being disruptive mean to you?
We believe that an educated consumer is better for the lending industry and the economy as a whole. Our goal is to disrupt the status quo. We want to challenge the traditional notion of transparency. We want to simplify the complexity of financial products. And most importantly, we want to provide consumers with tools, data and resources to make the best financial decisions through technology.