New credit score tool offers insight into getting the best credit card

September 21, 2011

There’s a certain mystery about applying for a credit card: Is your credit score good enough for the best card and rate? Just how much credit might you get  if you are approved? What does everyone else get?

Now there are answers to these questions. With a new tool from, you can use information from a long list of credit card companies to find the best card for you, and figure out the one that you’re most likely to get approved for.

CreditKarma, which has been providing users with their credit scores for free for the past few years, is now offering anyone the opportunity to look at real-world data to see what credit scores it takes to get approved for hundreds of different credit cards. And there’s a whole lot more you can do, including sort cards by average household income of those approved, sort by the amount of credit extended and even a cardholder’s age. It’s a handy tool for anyone who might want to see where the lines are drawn before applying for a credit card.

“Credit card companies generally know everything about you before you apply and you don’t know much about them,” CreditKarma CEO and founder Ken Lin says.

The reason this data is now available is that CreditKarma is looking to expand its audience and keep people coming back for more, since Lin says the site gets more of its revenue from advertising. The site operates by paying TransUnion to for access to the credit scores it then provides to its users free of charge, and in turn, CreditKarma gets to harvest the data from its more than three million users. While advertisers don’t get preferential treatment in the sorting, but they do get featured positions in other parts of the site.

Some highlights from the site about the most widely-held cards:

  • Chase leads the pack with an average credit score of 728 (based on nearly 305,000 cards issued to CreditKarma users).
  • American Express has the highest average amount of credit extended at $9,766
  • American Express also tops the list with an average household income of approved applicants of about $89,000.

There are quite a few cards from smaller issuers that have tighter credit standards, extend more credit and have higher household incomes (mainly retailer-issued cards).

If you do sign up for CreditKarma and see your credit score (you can check back as often as once a day to see any changes), the site will also use that information to help you understand why the score is what it is. And, if your credit needs improvement, you can learn what will help and play out a variety of scenarios including what would happen if you had late payments reported, you got additional credit or you paid off all your debt.

The site also allows you to apply for cards that fit your profile so you don’t risk rejection or getting a card that doesn’t suit what you’re looking for, including have a credit limit that is too small for your needs.

For those concerned about privacy, Lin says personal information isn’t shared with outside sources.

“We don’t sell any  of your data,” he says.

Lin equates what CreditKarma does with the popular real estate site, where you can find value estimates of property. “Zillow is interesting because I can look at my house and I can look at my neighbors house,” he says. “There’s a benefit in us sharing this data.”

Mac Clouse, a finance professor at the University of Denver, likes the idea of what CreditKarma is doing.

“In today’s world of consumer finance, transparency can be helpful,” he says. “Many consumers accept the offer of a credit card without reading all the terms and conditions, some of which is in the fine print. Then they are surprised by the size of the late fee, the interest rate change that happens if they are late, the way the finance charge is calculated, etc. It would also be helpful to know if you are dealing with a credit card targeted to the high credit quality consumers, or whether its target audience is the consumers who have been denied by all the others.”

Clouse adds that like any potential helpful information out there, people have to use it to be of value. He says, “While I think consumers can benefit from this service, the ultimate question is whether those who need this information the most will take the time to take advantage of the service.”

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It’s good to have an insight into the credit profiles of the other side. Knowing this should allow you to match yourself with the right creditor, and avoid a bunch of unneeded credit inquiries.

Posted by coops223 | Report as abusive