With banks tightening credit standards in the midst of a financial tsunami, it becomes even more important for consumers to know where they stand with their credit scores. And now, one consumer credit services provider claims that there might be an easier way to do just that.
Making credit reports easier to understand, and easier to use, is the idea behind the “Credit Report Card”, an interactive web tool that promises to treat your credit report like a fifth-grader’s report card, complete with letter grades in seven key credit scoring subject areas.
The report card was developed by Credit Karma, a San Francisco-based consumer credit report services web site that actually does offer credit reports, with “no strings attached” according to the company’s web site - free to the consumer (the company makes most of its money through paid advertisements). The company claims 250,000 registered users through January, 2009, and says that more than 850,000 free credit reports have been delivered to site visitors.
CreditKarma is no doubt counting on many of those users to try out the credit report card. When and if they do, they’ll find an interactive credit reporting tool that reviews and weighs key metrics like credit card utilization (the total credit card debt you have divided by the remaining credit on your credit cards), percent of on-time payments, the average age of open credit cards, total accounts, credit inquiries, total debt, and debt-to-income ratio.
Each of the criteria is graded, like most report cards, from an “A” to an “F” basis, and once you’re done, you can compare your score to other user’s credit reports on the site. But before you credit score school is in session, you’ll have to register on the site, and that means doling out your name, address, email address, and Social Security number. You’ll also be asked to verify key personal financial data, like dates of mortgage loan payments or a missed student loan payment that showed up on your credit report. So make sure you have your key financial documents handy so your account can be authenticated.
But that’s as complicated as the report card gets, and Credit Karma wants it that way. Pointedly, the seven criteria are touted by CreditKarma as being much easier and much more accurate than the often complex, 10-20 page credit reports from the big industry players like Experian (Stock Quote: EXPN) and Transunion.
Simplifying credit reports is a potentially golden business opportunity for companies who craft easier, more effective ways to figure out their credit scores. Demand for easier credit scores is high at a time when the economy has so many people focused on their financial health.
Consequently, CreditKarma may be among the first to tackle easier ways for consumers to manage their credit score, but it certainly won’t be the last.
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