You may have heard of Credit Karma—even the name sounds good—but you’d be surprised at how many borrowers are taken aback when their Credit Karma score turns out to be lower than the FICO scores that their lender utilizes. Read on to find out why. And most importantly, what you need to know about credit scores when applying for a mortgage.
Ever felt like you were living in a credit score twilight zone? You check your score on Credit Karma, and it’s looking mighty fine, like a freshly baked apple pie. But then, bam! You apply for a loan or credit card, and your FICO score comes back 100 points lower, leaving you feeling like you just got hit by a rogue asteroid.
What gives? Why is there such a discrepancy between your Credit Karma and FICO scores?
Let’s unravel this credit score mystery, shall we?
The Short Answer: Credit Karma and FICO use different scoring models, which means they don’t always see your credit history in the same way. It’s like comparing apples to oranges, or maybe a juicy mango to a spiky durian.
The Long Answer: Buckle up, credit score detectives, because we’re diving deep into the world of scoring models.
Credit Karma: This free credit monitoring service uses the VantageScore 3.0 model, which is known for being more generous than FICO. VantageScore takes a more holistic approach, considering factors like your income and employment history, which FICO doesn’t.
FICO: This is the granddaddy of credit scores, used by most lenders to assess your creditworthiness. FICO uses a more conservative approach, focusing primarily on your credit report information.
Here’s a table summarizing the key differences between VantageScore and FICO:
| Feature | VantageScore 3.0 | FICO |
|---|---|---|
| Scoring range | 300-850 | 300-850 |
| Factors considered | Credit report information, income, employment history | Credit report information only |
| Updates | Daily | Monthly |
| Used by most lenders | No | Yes |
So, why is your FICO score lower than your Credit Karma score?
Here are a few possible reasons:
- Your credit report information is slightly different. Even a small discrepancy in your credit report can lead to a significant difference in your scores.
- FICO is more conservative. FICO takes a more cautious approach to credit scoring, which can result in lower scores.
- Your credit report contains negative information. If you have any negative items on your credit report, such as late payments or collections, this will have a bigger impact on your FICO score than your VantageScore.
What can you do about it?
Here are a few tips:
- Get your free annual credit reports from all three credit bureaus (Experian, Equifax, and TransUnion). Review them carefully for any errors and dispute any inaccuracies.
- Focus on improving your credit report. Pay your bills on time, keep your credit utilization low, and avoid opening new credit accounts unnecessarily.
- Monitor your credit scores regularly. This will help you track your progress and identify any potential problems.
Remember, your FICO score is the one that matters most to lenders. So, if you’re planning to apply for a loan or credit card, focus on improving your FICO score.
And one last thing: Don’t despair if your FICO score is lower than you expected. With a little effort, you can improve it over time. Just keep at it, and you’ll be rewarded with a higher score and better credit terms.
Now go forth and conquer the credit score game!
How many credit scores do you have?
Many borrowers think they only have three credit scores – one for each bureau (Equifax, Experian, TransUnion). But different scoring algorithms are used to develop the score even though the consumer information originates from the three main bureaus. That’s why there are hundreds if not thousands of credit scores. Some are industry-specific, like in the auto industry.
Add to the confusion that scoring models are updated all the time. The lesson from this experience is to not rely solely on your Credit Karma score when applying for a mortgage.
What Consumers Have to Say
If you want to know what people really think – check social media. Some people have been pretty vocal regarding Credit Karma. Here are a few Tweets from Twitter:
“Credit Karma always says my credit score is like 750. However, after we recently refinanced, the bank informed me that my credit score was 825 in the credit disclosure letter. ”.
“Credit Karma is wrong 99% of the time. They can be anywhere from 100 points higher to like 80 less than the actual score. ”.
“If you think your credit score on Credit Karma is right, you wrong, lol.”
And for the last one – a bit more colorful!
“Credit Karma: “your credit score is 800.”
“Car dealerships: “ma’am. your shit is 325.”
FICO Score vs Credit Score vs Credit Karma (Why Are My Credit Scores So Different?)
FAQ
Why is Credit Karma score higher than FICO?
How far off is Credit Karma from FICO?
Why is my credit score 100 points higher on Credit Karma?
Why is my FICO score significantly lower?
What is a FICO® score?
Your FICO® scores are just one type of credit score that lenders or creditors may use when determining whether they’ll provide you a loan or credit card. While FICO® scores are commonly used by lenders to assess your credit risk, other credit scores can also give you a good idea of where you stand. We’ll get more into those scores later.
How accurate is my FICO score?
FICO scores are based on the information in your credit reports. The accuracy of your score will depend on factors such as which FICO Score model is being used; the credit bureau your report is pulled from; and whether your credit reports have up-to-date information. Errors on your credit report could also affect the accuracy of your FICO score.
What is a base FICO® score?
Base FICO® scores range from 300 to 850 and are made up of the following credit score factors: Depending on what your scores are, you may wonder what they mean. FICO defines the following credit ranges based on FICO® Score 8 credit scores:
What is the difference between Credit Karma and FICO?
Credit Karma and FICO are two completely different types of companies. Like WalletHub, Credit Karma is an independent website that, among many other features, gives users free access to their Vantage 3.0 credit score.