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 wondered why your FICO score is higher than your Credit Karma score? You’re not alone. This is a common question, and the answer lies in the different ways these scores are calculated.
FICO scores are the most widely used credit scores by lenders, while Credit Karma scores are based on the VantageScore model. While both models consider similar factors like payment history and credit utilization, they weigh them differently and may use different data sources.
Here’s a breakdown of the key differences:
- FICO scores are based on data from all three major credit bureaus (Experian, Equifax, and TransUnion), while Credit Karma scores are based on data from two bureaus (TransUnion and Equifax).
- FICO scores use a more complex algorithm than VantageScore, which may result in different scores for the same individual.
- FICO scores are updated less frequently than VantageScore, so your Credit Karma score may be more up-to-date.
Here are some specific reasons why your FICO score might be higher than your Credit Karma score:
- You have a thin credit file. If you have a limited credit history, your FICO score may be higher than your Credit Karma score because FICO gives more weight to the age of your credit accounts.
- You have a recent negative mark on your credit report. If you have a recent negative mark on your credit report, such as a late payment or a collection account, your FICO score may be higher than your Credit Karma score because FICO gives less weight to recent negative marks.
- You have a high credit utilization ratio. If you are using a large percentage of your available credit, your FICO score may be higher than your Credit Karma score because FICO gives more weight to credit utilization.
It’s important to note that both FICO scores and Credit Karma scores are valuable tools for understanding your credit health. However, it’s important to remember that they are not the same thing. If you are applying for a loan or credit card, the lender will likely use your FICO score to make a decision.
Here are some tips for improving your FICO score:
- Pay your bills on time. This is the most important factor in your FICO score.
- Keep your credit utilization low. Aim to use no more than 30% of your available credit.
- Don’t apply for too much credit at once. Every time you apply for credit, a hard inquiry is placed on your credit report, which can lower your score.
- Become an authorized user on a credit card with good credit history. This can help you build your credit history without having to open a new account.
- Dispute any errors on your credit report. Errors on your credit report can lower your score.
By following these tips, you can improve your FICO score and increase your chances of getting approved for loans and credit cards with favorable terms
Here are some additional resources that you may find helpful:
- Credit Karma: https://www.creditkarma.com/
- FICO: https://www.myfico.com/
- Experian: https://www.experian.com/
- Equifax: https://www.equifax.com/
- TransUnion: https://www.transunion.com/
Credit Karma Scores That Are Too High
In any given week, we have borrowers contact us who are very proud of their Credit Karma score. We call them the overly confident borrower. They’re sure that they’ll be able to get the best rate based on their score. But when we pull their credit, their score is much lower. They were devastated.
Karma Credit Scores That are Too Low
On the flip side, we’ve had borrowers who were sheepish about their low Credit Karma score. We call them the shy borrower. They asked if there was any way they could qualify for a mortgage. We pull their credit, check their FICO score and find it’s much higher than they thought. They were elated.
FICO Score vs Credit Score vs Credit Karma (Why Are My Credit Scores So Different?)
FAQ
Why is my FICO score so much higher than Credit Karma?
Which credit score is more accurate FICO or Credit Karma?
How is my FICO score higher than my credit score?
How many points is Credit Karma off by?
Is Credit Karma better than FICO?
Credit Karma, which provides free credit monitoring, gives different scores than FICO. Here’s why your Credit Karma score might be higher. For those who are working to improve their credit scores, a tool like Credit Karma can be very useful.
How can Credit Karma help you improve your credit score?
For those who are working to improve their credit scores, a tool like Credit Karma can be very useful. Credit Karma provides free credit monitoring through daily or weekly updates to your VantageScore, which isn’t the same as your FICO score. VantageScores might trend higher than FICO scores because of how they are calculated.
What is the difference between Credit Karma and VantageScore?
Meanwhile, VantageScore 3.0, which Credit Karma uses, has the following ranges: The key differences are that VantageScores don’t have a Very Good category, and scores generally are about 20 points lower to receive the same designation as a FICO score.
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.