Credit Karma has been fined $3 Million for falsely claiming they were pre-approved for credit cards, when in fact they were not. Unfortunately, this is a level of deception is based on the unreliable credit information Credit Karma provides consumers. There were two problems for Credit Karma’s and its clients.
Credit Karma offered a new opportunity for its clients by making claims to certain number of its clients that they were “pre-approved” for a credit card from February 2018 until April 2021. Credit Karma claimed that “90%” of these clients were pre-approved for credit card offers. However, many were in fact not preapproved. About one-third of the clients who applied for credit cards after having been assured by Credit Karma of their preapproved credit card, were in fact not approved. That is a problem.
There are two problems with this claim. First, Credit Karma offers the non-lender and unreliable VantageScore to consumers. Credit card companies utilize the FICO Credit Score to approve the credit cards for its clients. These scores are different and often are off more than 30 points. Hence, the VantageScore offered by Credit Karma is not a “lender’s credit score.
The second problem? Credit Karma is not a credit card company. It could not make offers in behalf of a credit card company. It was making representation to consumers that they had no basis or authority to do.
As a result, many consumers wasted much time running down a false offer and also incurred a hard inquiry based on the false presumption that they were pre-approved. A hard inquiry can lower a person’s FICO Scores up to seven points for each one.
The Federal Trade Commission made a statement in regards to Credit Karma. "The FTC will continue its crackdown on digital dark patterns that harm consumers and pollute online commerce," said Samuel Levine, Director of the FTC's Bureau of Consumer Protection. Darks patterns are marketing designs by some companies that trick consumers to take certain actions.
Best to stay away from Credit Karma and the unreliable credit score and other loan information they freely give to unknowing consumers.