Understanding your credit is key for financial freedom.
Credit scores tell lenders how much of a risk you are, and whether or not they should lend to you.
A good credit score can lead to a home loan, a new car, or a line of credit that lets you start your dream business.
Calculating your credit score is a key financial service, which is why sites that offer a free score are so valuable.
But before doing a side-by-side comparison of Credit Sesame vs. Credit Karma, we’ll break down everything you need to know about credit bureaus, and the different systems they use to figure out your credit score.
Then, we’ll compare Credit Sesame vs. Credit Karma and dive into the specialized perks that each offers.
Credit Scores: A Primer
Credit scores are simplified numbers that give lenders a quick glance at your credit history.
These scores are slightly different than a full credit report, which takes a more thorough look into your credit history and has a record of payments you owe and have made.
Credit scores have several other criteria and are meant to provide banks or other lenders a quick way to access your risk profile.
Good scores theoretically tell banks that you are more likely to pay off a loan on time.
Credit scores are hugely important in your personal finance.
They will determine your interest rate and credit card eligibility and more.
Several factors go into a credit score.
- Credit utilization (how much of your credit you are using)
- What you owe
- Cash in your accounts
- History of late payments
- Length of credit history
Building a good credit profile takes time, as you need to show banks that you have a track record of paying what you owe.
This can be done through a timely pay-down of student loans or by paying off your credit card every month.
Building a good credit score isn’t just about having a nice high score — it can be the difference maker when it comes to buying a car, buying a home, or opening up a small business.
Credit Bureaus, FICO, and VantageScore
Credit scores are compiled by three main different credit reporting bureaus, and calculated using two different scoring systems.
It’s a little confusing, but understanding how they work will allow you to understand why Credit Sesame vs. Credit Karma are so important.
First, let’s get to the bureaus.
TransUnion, Equifax, and Experian
Back in the day, banks used to vet customers individually before extending loans.
But as cities got bigger and people moved around more, a need grew for a national database of credit histories.
That’s where these companies stepped in.
The United States doesn’t have one government bureau to track credit histories but instead let these three for-profit companies take on the responsibility.
Businesses and banks then form partnerships with one (or more) of the bureaus to provide credit information about potential lenders.
FICO Score and VantageScore
While TransUnion, Equifax, and Experian are the bureaus that compile credit histories and using that to generate a credit score, they need to use a scoring system to generate that number.
The FICO score was introduced in 1989 and has long been the standard-bearer for calculating a credit score.
They introduced the 300-850 range you see in credit reports.
VantageScore was a new scoring system more recently introduced by the big three credit bureaus and has slightly different criteria when calculating your score.
Their latest model, VantageScore 3.0, also runs on the 300-850 range.
While the big three bureaus tend to prefer using VantageScore now, you can also access your FICO score through MyFICO.com.
It’s a lot, we know.
But this explains why your credit score may be different at TransUnion and Experian.
Not only might they have a slightly differing history of your credit, but they may also be using a slightly different scoring system to calculate your score.
This is why sites like CreditKarma and CreditSesame are so useful — they give you a more full credit report, letting you look at multiple credit bureaus and different scores to see what your credit looks like.
Credit Monitoring, Credit Holds, and More
Another benefit of credit bureaus and sites like Credit Karma and Credit Sesame is their help with identity theft protection.
If you’ve had your social security number stolen or compromised, for example, these sites can help restore your credit and prevent further damage from being done.
Even if you haven’t had personal information taken but are concerned about the possibility that it might be exposed, you can use these services to protect yourself.
Credit Monitoring Services
Credit monitoring is offered by the three credit bureaus as well as Credit Karma and Credit Sesame.
Credit monitoring is an automated process that looks for unusual activity, and then will alert you if something seems amiss.
If you suddenly open four new lines of credit in a week, they’ll let you know.
Likewise, if they see a sudden change in your score, your credit usage, or several missed payments, these monitoring services will alert you to a change in your credit score.
A credit hold is a more extreme version of credit monitoring and is only offered by the credit bureaus.
Credit holds will link your credit account to your personal phone number, and will only allow new lines of credit to be opened if someone from one of the bureaus calls you and asks you several questions that only you can answer.
Credit holds can make it more difficult to easily apply for a credit card or car loan, but if you are worried about financial security, they can be a strong preventative step.
Credit Sesame vs. Credit Karma
The biggest perk of both Credit Sesame and Credit Karma is that they are both free.
All three of the credit bureaus listed above will offer many (or all) of the services below, but all three charge for access to that information.
Credit Sesame and Credit Karma do not.
When comparing Credit Sesame vs. Credit Karma, it’s important to understand that both services are incredibly similar.
Both websites offer great free services including free credit score information, and free credit monitoring.
Both have mobile apps available for iPhone and Android.
As both are free, there’s no harm in utilizing both to give a more complete picture of your credit and take advantage of what both have to offer.
If you just want to stick with one and avoid all the emails from both, we can look at what each has to offer.
Credit Karma Perks
CreditKarma.com has all the features listed above and has two offers that Credit Sesame does not.
For one, they provide a full free credit report.
Credit Sesame users have to pay a fee for a full TransUnion credit report.
Likewise, Credit Karma provides scores from two different credit bureaus: TransUnion and Equifax.
Credit Sesame only provides your score from TransUnion.
While these numbers tend to be similar, Credit Karma can provide you with a little more complete picture of what your credit score looks like across bureaus.
Credit Sesame Perks
CreditSesame.com gives you free credit scores, has an app, and is easy to use.
The service also has a strong offer that Credit Karma does not: free $50,000 identity theft insurance for all members.
This is a nice deal that can make Credit Sesame worth signing up for on its own.
A Credit Sesame review also says that their credit monitoring alerts are more user-friendly and easier to find than Credit Karma.
Both options are incredibly helpful for people trying to better understand their credit without having to pay any fees up front.
Know Your Score With Credit Karma and Credit Sesame
Before you take any financial advice or undertake any financial endeavor, it’s helpful to understand your credit score.
With different credit bureaus, different scoring systems, and more, credit can be a somewhat complex world to navigate.
When doing a side-by-side comparison of Credit Sesame vs. Credit Karma, both are useful sites that simplify the process and do it all for free.
Whichever you choose, you’ll gain a great resource to help you better understand your financial situation, protect yourself from fraud, and make smart choices with your money moving forward.