Insider Q&A: Ken Lin, CEO of Credit Karma
NEW YORK (AP) — Credit Karma is probably best known for giving Americans regular access to their credit scores, but the San Francisco-based company also acts as a starting place to shop for a loan, bank account or mortgage.
Roughly 76 million Americans have used Credit Karma, giving the company a broad view into Americans’ borrowing habits.
CEO Ken Lin spoke to The Associated Press about what financial products borrowers are still shopping for in this high inflation economy, as well as Americans’ spending habits.
The interview has been edited for length and clarity.
Q: What have you seen in credit card activity in recent months as Americans deal with high inflation and economic uncertainty?
A: Unemployment continues to be relatively low. What we’ve been seeing is a lot of origination happening in credit cards. The other unique phenomenon is while interest rates go up, the large banks are still trying to be competitive. They’re able to do a lot of lending in this environment. Consumer spending is going great. Americans still have historically lower credit card balances, and while they are building up those balances again, it’s still healthy.
Q: Mortgage rates have gone up considerably, and we have seen mortgage activity decrease. What are you seeing?
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A: Most of the mortgage market is refinancing. Nobody is refinancing right now because the prevailing rate for many mortgages for so many years was 3% or 4%. Now we’re at 7%. You’re not really going refinance to get a higher rate.
What we have seen is a much larger number of people are going into home equity lines of credit or home equity loans. People are finding that more economical. Unless you’re really desperate, you’re not going to do a cash out refinance.
Q: Higher interest rates can mean higher yields on savings accounts, but banks for some time did not need additional deposits so they weren’t paying for them. Are they still dragging their heels?
A: I think this is an opportunity for most consumers to really be more cognizant, more thoughtful around their finances, because we assume when rates are going up, that the money in our savings accounts is going up, and that’s generally not the case. You really need to push your bank to offer you that higher yield, or even open a new account elsewhere.
Q: What are your thoughts on the growth of buy now, pay later loans?
A: I think it’s a little bit of a dangerous space. One of the nice things about the traditional credit industry is they are able to calculate and understand how much debt you have relative to the amount of income you earn. There’s no such visibility into buy now, pay later products. You can take out one loan with multiple companies and none of them would know, which I think makes it easy for borrowers to get in over their heads.