One of my favorite financial websites is Credit Karma. I love the ability to get and track my credit score for free. Now they are expanding their services to provide you with credit report information. The new feature is called Credit Report Cards, and it is also free. I checked it out today and I thought it was a great feature.
How To Get Your Free Credit Report Card
If you’re not a Credit Karma member yet, you’ll have to sign up. Otherwise, just log in to your account. After you logged in, you’ll see a screen that prompts you to update your score. Go ahead and do it now. After your Credit Karma score is updated, click on the Credit Report Card link. Credit Karma will ask you to validate your identity by answering a few questions. If you can answer the questions correctly, Credit Karma will grant you access to your Credit Report Card.
Credit Report Card
The credit report card has 7 sections as follow. Each section comes with a graph and a link that gives you more information — e.g., more graphs and details. Overall, this is a very detailed report that allows you to drill down and get a firm grasp on how to improve your credit score.
Open Credit Card Utilization
“Credit card utilization is defined as the total credit card debt you have divided by the total available credit on your credit cards. High credit card utilization can be a warning sign of credit risk.”
I am doing well here, only utilizing only 2% of my total limit for my credit cards.
Percent of On-Time Payments
“On-time payments are an important component of your credit score. Using your credit responsibly and paying bills on time are great ways to maintain a high credit rating.”
I am doing well here also with 100% on-time payments.
Average Age of Open Credit Lines
“Credit history is a significant component of your credit score. As such, the average age of your credit lines can be a strong indication of your credit history. Care should be used in keeping old accounts open, active, and in good standing.”
Although my oldest credit line is 12 years 6 months old, the overall average age is only 5 years and 11 months with the newest being my car loan. If I don’t open any new credit line and let the average age grows to 6+ years, my credit score should improve as a result.
“Both the total number of credit accounts you have and the mix of credit you have will affect your credit score. A healthy mix of revolving credit cards, charge cards, installment loans and mortgages will also impact your credit score.”
Personally, I think I have too many credit cards and loans. Apparently, the system doesn’t agree with me and think 19 credit accounts are not enough (6 open accounts and 13 closed). My preference is to keep things simple, so I am not going to run out and apply for a whole bunch of credit cards just to score better in this area. I’ll just live with a “D”.
Hard Credit Inquiries
“Inquiries for credit, also known as hard inquiries, are placed on your credit report whenever you apply for credit. These results are the inquiries for credit over the last 2 years. It is important to note that soft inquiries, like the type used by Credit Karma, do not impact your credit score and are not counted in this metric.”
I got a C for 4 hard pulls. At least one is from the car purchase. Another is probably from taking out a life insurance policy last year. I am not sure where the other two are from. With no planned activities in the near future, this factor should also improve going forward.
“Tracking your total debt is a good way to gauge your financial health. When lenders evaluate your credit, this is often a key metric they review.”
This is a very cool section, when you click on the “more info” link, you’ll get a pie chart with a break down of your debt. It’s important to note that there is not a strong correlation between total debt and credit score — meaning, more debt doesn’t mean better or worse credit score, or vise versa.
Debt to Income Ratio
“Your Debt to Income (DTI) ratio compares the difference between your monthly income and the monthly amount you spend to maintain your debt. It is often a metric used when evaluating loan applications. In general, the lower the DTI, the better the credit risk.”
You’ll have to enter your own monthly pre-tax household income to get a customized reporting of your DTI. I entered $10,000 for demonstration purpose only. Although, DTI is not a factor in your credit score calculation, a lower DTI reflects a stronger financial health because less of your income goes toward debt payment.
My recommendation is to give it a try and look carefully over the grade details tabs and more info pages. They will help you better understand your credit score and how to improve it.
Pinyo is the owner of Moolanomy Personal Finance and a Realtor® licensed in Virginia and Maryland. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, financial literacy author, and Realtor®.