One on One With Credit Karma’s Kenneth Lin

I was introduced to Credit Karma a few weeks ago at a Quicken media event courtesy of a chance meting with a company representative who gave me the scoop on the site. The prospect of obtaining free credit scores was more than a little bit awesome, so I thought it wise to probe deeper to get an understanding of just how Credit Karma pulled it off. This led to an opportunity to chat it up with Credit Karma’s CEO and Founder, Kenneth Lin to find out a little more about the company, its goals, and how it’s able to produce no-strings-attached free credit scores any day of the week. Keep on reading for some behind the scenes info (and a few credit building tips!) on one of the most helpful and beneficial websites to hit the interwebs.

1. When did Credit Karma officially launch?
Credit Karma launched its beta service in February 2008.

2. Aside from your service being free, what are the benefits of using Credit Karma instead of just getting a free credit report each year?

We have three core value positions for consumers.

First, we provide consumers free access to their credit score anytime and as often as necessary without any hidden fees or obligations. Second, we provide educational tools and content to help consumers better understand how credit and credit scores work. Third, we provide access to offers and incentives based on credit score ranges. Today many of the offers come from financial services companies. We are currently expanding into other industries including cable, wireless and insurance, just to name a few.

3. Do you have a background in the credit scoring industry? And is Credit Karma your first entrepreneurial venture?
I do. I started my career working for a Credit Card company building scoring models and evaluating default risk about 10 years ago. Since then I have managed online marketing programs for pro-consumer companies like E-LOAN and Upromise.

Credit Karma is actually my second entrepreneurial venture. I founded an online marketing company in 2006 which helped shape the business model for Credit Karma.

4. What inspired you to start Credit Karma?
Having worked with great consumer brands like E-LOAN and Upromise and financial pioneers like Chris Larsen, I saw an opportunity to build a service that could help consumers better understand and access credit.

Prior to Credit Karma, there were only a handful of ways to access your credit score and most of them had hidden fees or obligations. Considering that a credit score is probably the most important metric of a consumer’s financial health, I think free access should be a fundamental consumer right. So I set out on finding a way to provide this service for free.

5. What is your mission for the Company, and are you more focused on just making credit scores available or is there a focus on helping people improve their credit scores and offering them ways to increase it?
We are focused on demystifying credit and making credit scores available to all consumers for free. In today’s economic environment, credit is more important than ever. Our service is built to educate consumers on the importance of good credit, maintain and manage credit health and then reward good credit through offers.

6. A lot of the sponsors on the site are for credit cards. Do you think it’s a conflict of interest since a majority of Americans are already in good deal of credit card debt? Credit cards present a great convenience when used properly. In many cases, they are also the backbone of a consumer’s credit report and history. We stress education and proper management of debt. For example, our site provides consumer unbiased user feedback on credit cards along with editorial recommendations based on usage type, credit score and member experience.

Everything on the site is geared to help consumers become more informed about finances whether it is loans, credit cards, savings rates, or even cable services.

7. Where do you pull your credit scores from? Is there a specific reason why you chose that credit bureau?
We are currently using TransUnion as our credit bureau. We chose them because they share our vision of helping consumers.

8. I think a lot of people are worried that pulling their credit score each day will lower it. Does using Credit Karma affect a person’s score in any way?
Checking your credit score on Credit Karma does not impact your score. This is a common misconception. The truth is that pulls initiated by the consumer for the consumer’s own use will not lower the score.

There is a strong need for education in the market on this and other issues related to credit especially right now. We hope Credit Karma can help educate consumers on managing their credit score over time and provide tips, tools and simulators to support better decision-making and improve individual credit health.

9. Do you plan on expanding the Company and in what ways?
Our expansion is centered on two key areas. Better tools and content and better offers and incentives. Better tools is all about making credit easy to understand and transparent. Our recent launch of the credit simulator is a prime example of this vision. The Credit Karma simulator predicts the affects of various everyday financial actions against your credit score. The simulator is custom for each individual’s credit report. For example, applying for a credit card may lower one consumer’s score by 25 points on one, and only 2 points for another.

The second component is finding more partners to provide incentives to our members. Getting rewarded for good credit is the concept of “karma”. This aspect of Credit Karma’s offering will continue to grow over time.

10. Do you think that you guys will ever expand to include credit reports along with the scores and would that even be possible to offer for free since it seems like that would be taking income away from the credit bureaus?
Today, by law consumers can already get their credit report for free on annualcreditreport.com. We didn’t see much value in spending resources building something consumers already get for free. The score was the missing component. It is probably the most confusing aspect of credit so we decided to tackle this first.

We have a number of features and offerings in the pipeline based on user feedback and requests. We do not pose a threat to the bureaus as we pay for all data on the consumer’s behalf.

11. I noticed that you have a credit simulator that’s a bit more in depth than most credit score simulators that I’ve used before. Is there a way to offer tips for improving your credit score that are based on each person’s credit history?
I think our credit simulator is quite unique. It is customized by every user’s unique credit report. This is just the first step in our vision. We will continue to explore tools that provide user recommendations, educate the consumer and provide guidance for better decision-making.

12. Our website caters to a young, 20-something crowd that doesn’t have a long credit history. What are some tips for our readers to build their credit score without having 10 years of credit history and struggling to pay their student loans and credit cards on time each month?
We really stress financial responsibility. There is no easy way to build good credit. That means it takes years to build good credit and a few missed payments to destroy it. The best practices are:

1. Know your credit. You can’t improve it if you don’t it or if you don’t know how it works.
2. Pay your bills on time. Using credit is good and helps build your credit history but you have to pay on time to get this benefit.
3. Set a budget. If you are struggling to pay bills, you need to prioritize and have the fortitude to stick by it.
4. Find the right products. Whether it is a credit card, s student loan, or an auto loan, different products can cost you thousands over the life of the loan in interest and fees. Generally the better the credit, the lower the interest so use the knowledge to improve your score and then improve your rates.
5. Continue to learn. Financial health is complex. Use the content on creditkarma.com and other pro-consumer sites to be aware of trends in credit and financial products. Education can save consumer hundreds of thousands of dollars in interest and fees over a consumer’s lifetime.

Copyright ©2008 by LifeStyler

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