[Updated 2020.1] Credit Karma now offers a free tax filing service called Credit Karma Premium Tax Software 2019, which lets you prepare both state and federal tax returns online for free. The CK link is below:

The feature set is quite strong, including:

  • Audit Defense
  • Max Refund Guarantee
  • Accurate Calculations Guarantee
  • Error Double-Check
  • Dedicated Support
  • Jumpstart
    • Ability to import last year's return from H&R Block, TurboTax or TaxAct
  • & More (refer to product page)

For detailed usage instructions and our review, see:

About Credit Karma

Credit Karma (CK) is actually a very established website. Long before major credit card issuers started offering free credit scores, Credit Karma was already providing free TransUnion and Equifax credit scores, along with the corresponding credit reports. It is also very beginner-friendly: about 1-2 months after you get your first credit card, you can usually start seeing your credit information on CK. Another major feature of CK is alerts for changes to your credit report. For example, if you apply for a new credit card and it results in a new hard pull or a new account, you can get notified promptly. That is a very practical feature.

Starting in 2017, CK also began offering free tax filing services, which was a pretty big development. We will cover that later in this article as well.

Signing Up for Credit Karma

Signing up for CK is very simple. You just need to complete the following steps:

  • Step 2: Enter your personal information (name, address, date of birth, and last 4 digits of your SSN). If verification fails, you may be prompted to enter your full SSN.
  • Step 3: Verify your identity through Public Record questions. For example: did you apply for a personal loan in 2015, what was your address in 2016, did you open a credit card with xxx bank in 2015, etc. In short, read carefully. If the choices make no sense to you, it is usually safe to boldly choose none of above.

Credit Karma Features

Free Credit Scores

One of CK's biggest selling points is that it offers free credit scores, and not just from one bureau, but from two: Trans Union and Equifax.

One thing to keep in mind is that this credit score is calculated differently from the scores used when you apply for a credit card or a personal loan. It is a simulated score calculated by CK based on your credit report. It uses the VantageScore 3.0 model, not the FICO score most people usually refer to.

Even so, this score still has some reference value. What matters most is the trend. If it rises significantly, your credit report is probably in good shape. If it drops sharply, you may have missed a payment or applied for too many credit cards recently. So the change in direction is what matters; the absolute number itself is usually less meaningful.

CK also has one of the clearest explanations of credit scores that I have seen.

Credit scores are updated about once a week, which is fairly timely.

Free Credit Reports

In addition to the scores themselves, CK also provides very detailed credit reports, which are basically quite close to the free annual reports from the credit bureaus. One thing to note is that the reports are provided separately by the two bureaus, TU and EQ, so remember to switch between them and check both. In general, the biggest difference between the two is usually the number of hard pulls, since banks do not necessarily pull all three bureaus. Existing credit card account information is usually the same.

The credit report includes the following information:

  • A list of all current credit cards
  • Detailed information for each card
  • A list of closed credit cards
  • Details on closed cards, including whether you closed the card yourself or the credit card issuer closed it
  • Other credit-impacting information such as Hardpull, collection, and public records

Compared with the credit bureau reports, the only thing missing is Soft Pull information. But Soft Pulls are visible only to you anyway, and banks cannot see your SP when reviewing your applications. So it is perfectly normal that CK does not show them.

Other Features

  • Debt summary
  • Credit card and loan recommendations (just browse them casually; there are often a lot of bad offers)
  • Credit score simulator. It is pretty interesting and especially helpful for beginners who want to understand the impact of different actions. But again, the trend matters more than the exact score.
  • Find lost money. This feature redirects you to government websites for each state. If you have lived in the US for a long time and moved several times, you may have some unclaimed money. For example, you might have moved and never received a previously mailed check.

Credit Karma Free Tax Filing Feature

Credit Karma, a website that has long provided free credit reports, began offering free tax filing services in 2017. To avoid having readers get to the end of this article only to be disappointed, we should clarify this upfront: most F1/J1 students are classified as tax nonresidents (Non-Resident Alien), so they cannot use Credit Karma's free tax filing service. To determine your residency status, please refer to the tax residency test in this article.

For most people who are tax residents (Resident Alien) or US citizens, aside from a few exceptions, CK's free service can be used to file both state and federal taxes.

Free Tax Filing Service

If you are not a nonresident alien for tax purposes (see this article; most people on H1 visas and green card holders are tax residents), you can now go to the Credit Karma Tax website and use this feature. Tax filing is completely free, including both federal and state returns.

What’s covered

Credit Karma’s tax filing service supports Forms 1040, 1040A, and 1040EZ. They offer both e-filing and the option to print the forms and mail in your return yourself. However, you cannot use it if any of the following applies to you:

  • You need to file state taxes for multiple states, or you need to file a nonresident state return for a particular state;
  • You want to file only a state return without filing a federal return;
  • You need a federal nonresident return (Form 1040NR or 1040NR-EZ);
  • You need to use the Foreign earned income credit (for overseas income) or the Non-dependent earned income credit (for divorced parents who do not have custody);
  • You are Married filing separately under a common-law marriage; or
  • Trust income reported on a K1 tax form.

For a complete list of supported tax forms, see this list.

How does Credit Karma make money?

Credit Karma says that by offering the free tax filing service Credit Karma Tax, they can attract more users to creditkarma.com and earn profits from users’ activity on the site.

Will Credit Karma use your tax data for other purposes?

At the moment, the Credit Karma website does not clearly state whether it will use tax filing data for purposes other than tax preparation. Unless Credit Karma Tax obtains the user’s permission in advance, tax return data cannot be used for activities unrelated to tax preparation under Treas. Reg. §301.7216, such as deciding which credit card ads to show on creditkarma.com or for other Credit Karma marketing activities. Because of that, we do not think there is too much reason to worry about personal privacy here.

Credit Karma Saving

Credit Karma has launched its own saving account, and applications are now open. This saving account offers 2.03% APY, charges no fees, and has FDIC insurance up to $5 million. Credit Karma says it optimizes across 800+ banks to obtain this APY. In my opinion, there are other accounts with high APYs as well, but some require fairly strict conditions or a large balance. This no-fee option from CK is still worth trying.

If you want to use the saving product, you still need to register for Credit Karma first.

After registering, you can click saving in the upper-right corner of your account, or just use the link below.

You can see the basic information for this saving account here, and it specifically mentions that no credit check is required and it will not affect your credit score.

When you enter your SSN, it emphasizes again that it will not pull your credit report and will not affect your credit score.

Summary

Overall, Credit Karma is a website well worth signing up for. On one hand, it provides free TU and EQ credit scores and credit reports. On the other hand, it also offers free tax filing. I also think the interface is quite well designed, and the ads are not too intrusive. The only downside is that sometimes you cannot log in, and even resetting the password does not help. I am not sure what kind of bug is causing that.

If you are interested, you can also sign up for the similar service Credit Sesame. It also provides TransUnion scores and reports, and it even includes free identity theft insurance.

Signup Link