The Internet has made many things free and thanks to Credit Karma that now includes credit score. I spoke to Credit Karma founder Ken Lin about how he makes money, the $6,818 credit card debt each average American carries, and failing grades.

When was Credit  Karma started? Credit Karma is a site that has been around for about 15 months. We came into the business with hopefully a new take on it. Why don’t we simply sell advertising on the site and give consumers their credit score any time they want? We think fundamentally this is a better thing given the economic climate we are in.

The average consumer debt decreased by $120 in July. That seems like nothing. Well when you put it against 180 million consumers, it’s a pretty big debt load. Two percent on a monthly basis is compelling and if the trend holds, will it annualize to 24 percent? Probably not, but on a monthly basis 2 percent is meaningful if not compelling.

So people are paying down their credit card bills, their mortgage, and they are not buying much? Consumer debt has been dropping across all verticals. We think it’s a confluence of two things. One is the economy. Consumer income is down. Consumer spending is down. The second component is really a function of tighter credit markets. Two years ago…there was so much liquidity. It was easy to get credit. There’s been a major pull back of that in the past six months.

We expected that, right? The tighter credit is not the expectation. The government is trying to spur on consumer spending by encouraging mortgage lenders to be a little more free with their lending. The credit card holders bill of rights will help tighten the market. People won’t have access to credit quite as easily anymore. It used to be 650 and you could get credit. Today your score needs to be 700 or higher to get that same type of card.

What is special about Credit Karma? We boil it down to the top seven metrics that affect your credit score and we give you an A to F grade. We give you great metrics but we also put it into perspective. Everything on our site is free. We think this is a better way of doing business.

How does Credit Karma make money? We sell advertising.

The site also makes money through offers? Advertisers are willing to give you a compelling offer based on your credit score. We don’t sell consumer information so the only way companies can reach you is through advertising. As a consumer you can look at it if you want to. You can click on it if you want to. It is completely up to the consumer.

Give me an example of a typical offer. Lending Club is a P-P lender. Small loans, people to people. So both parties save by cutting out the middleman bank. An offer would be save 10 percent on registration fees.