Credit Karma Inc., a start-up that offers free credit scores online, plans to add features to let consumers calculate how their scores would change if they consolidate debts on to different credit cards or as they get older and build a longer credit history.
Kenneth Lin, the San Francisco company's founder and chief executive officer, said it makes money by hosting targeted advertising to consumers based on their credit quality — similar to how Google Inc.'s Gmail service hosts targeted advertising based on the content of users' e-mails.
"Higher credit is often correlated to higher profits," Mr. Lin said, and if advertisers "can reach customers that are more profitable, they are going to reciprocate those savings back in the way of savings and discounts" to their customers.
Since launching in January, Credit Karma has hosted ads from home equity and personal lenders, credit card companies, auto insurers, and phone, cable, and Internet service providers.
Mr. Lin said partnerships with personal investment companies, student loan and auto financiers, retailers, and cell phone carriers, to name a few, are future possibilities.
Chris Larsen, the CEO and founder of the peer-to-peer lending site Prosper Marketplace Inc. and an investor in Credit Karma, said "nobody really knows what goes into those scores, and if anything, the scores are going to get more complicated."
Credit Karma is "putting consumers in the driver's seat, and letting them take the full value of their data," he said.
Mr. Larsen, a longtime advocate of greater transparency about credit scoring, met Mr. Lin when they worked together at E-Loan Inc., which Mr. Larsen founded and where he was CEO before the Pleasanton, Calif., online lender was acquired by Popular Inc. in 2005. (Mark Lefanowicz, the current president of E-Loan, is also an investor in Credit Karma.)
The tools that Credit Karma plans to add over the next few months offer another example of Web marketing companies using comparison features to attract customers in a hotly competitive market.
Mr. Lin said that "much like how Zillow.com allows you to compare prices" for real estate, "we want to be able to compare credit scores" based on factors like one's age and debt.
He was careful to distinguish Credit Karma from lead aggregation sites like Credit.com and LendingTree.com, but said his company's business model shared the common idea of customizing Web applications to individual consumers' demands. "We are actually incentivizing them to improve their score," he said.
But he said Credit Karma differs from some other free online scores in that it "is predicated as an educational resource."
Also unlike other providers of free credit reports, "we don't sell personal information, we don't share it with our sponsors," Mr. Lin said.
"That ultimately helped us get around all the concerns with privacy issues and the Fair Credit Reporting Act," which governs the terms under which companies can pull a borrower's credit.
The scores Credit Karma offers are provided by the Chicago credit bureau TransUnion LLC, which uses a proprietary model with scores ranging between 300 and 900. The industry standard FICO score, which is produced by Fair Isaac Corp. of Minneapolis, ranges from 300 to 850.
Mr. Lin said Credit Karma had "lots of opportunities" to work with other bureaus too.
It will also let site users compare scores using more casual factors, like the average score of golfers versus bowlers or red states versus blue states.
