It’s important to know your exact credit score before you apply for loans, credit cards, mortgages, and other financial products. The credit score Credit Karma gives you, on the other hand, is often higher than the score your bank or lender gives you. There are some key reasons why this occurs.
What Credit Scores Does Credit Karma Provide?
Credit Karma provides users with a VantageScore credit score based on data from TransUnion. VantageScore was created in 2006 by the three major credit bureaus – Equifax, Experian, and TransUnion.
There are three main versions of the VantageScore – versions 10, 2.0, and 30. Credit Karma uses VantageScore version 2.0 or 3.0 which has a score range of 501-990.
Most Lenders Use a Different Scoring Model
Credit Karma gives a real VantageScore, but most lenders use FICO scores to decide if someone is creditworthy. FICO scores are between 300 and 850, and they are calculated differently than VantageScores.
This means that Credit Karma’s score is probably not the same score a lender will use. The Fair Isaac Corporation makes FICO scores, which are different from VantageScore in that they use different factors and weightings.
Credit Karma Only Uses One Credit Bureau
One more important difference is that Credit Karma only uses your TransUnion credit report to figure out your VantageScore. When you apply for credit, however, lenders often get your credit report and score from all three of the major credit bureaus: Equifax, Experian, and TransUnion.
If the information on your TransUnion report differs from Equifax or Experian, it can lead to scoring differences. Negative items or discrepancies with your name, address, or account details on other credit reports could lower the scores lenders receive.
Different Versions and Scale
As mentioned previously, Credit Karma provides a VantageScore 2.0 or 3.0 on a 501-990 scale. However, many lenders use the FICO 8 model which scores from 300-850.
Even though 990 seems higher than 850, the VantageScore’s wider range means the scores are not directly comparable. A score of 700 on FICO 8 does not equal a 700 VantageScore. In some cases, certain VantageScores convert to lower FICO scores.
Credit Karma Scores May Not Factor Debt-to-Income
VantageScores from Credit Karma take into account your payment history, credit usage, age of credit, new credit, and credit mix. However, it does not consider your debt-to-income ratio which compares your monthly debts to income.
Lenders often calculate your DTI when getting your credit scores from bureaus. A high DTI can lower the credit scores they receive compared to Credit Karma’s VantageScore which ignores DTI.
Takeaways
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Credit Karma provides a VantageScore, while most lenders use FICO scores.
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Credit Karma only checks your TransUnion credit report. Lenders combine reports from multiple bureaus.
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VantageScores and FICO scores have different ranges and calculation methods.
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Factors like debt-to-income are assessed by lenders but not by Credit Karma.
While Credit Karma provides a legitimate credit score, it should be viewed as an estimate or guide only. The scores from lenders are more important when applying for new credit. Checking your reports and scores from all three credit bureaus provides the most complete picture of your creditworthiness.
Here’s why there may be credit score differences between what you see on Credit Karma and elsewhere.Updated Thu, Oct 31 2024
On Tuesday afternoon, consumers took to Twitter to express their frustration over their credit scores on Credit Karma, the personal finance company owned by Intuit.
The issue for most wasnt that the credit scores they were finding on the Credit Karma website were low—rather they were too high.
Consumers tweeted about going to apply for a credit card or loan thinking they have good or excellent credit, only to soon find that the credit score that the card issuer or lender pulled was lower than what they saw on Credit Karma.
The specific tweet that started off the conversation can be found here. Twitter users were quick to follow up and joke about how inflated their credit scores looked on Credit Karma.
But they were on to something important when it comes to checking your credit score.
Below, CNBC Select breaks down why you can expect your credit scores to differ, depending on where you check them.
Why Does Credit Karma Show A Higher Score? – CreditGuide360.com
FAQ
Is a Credit Karma score lower than a FICO score?
There are reports of people with Credit Karma scores over 700 with both bureaus but with FICO scores in the lower 600s. Other times, the opposite might be true. Your Credit Karma score could be much lower than your FICO score. It all depends on the make up of your specific credit profile. Should I even bother with the Credit Karma score?.
Does Credit Karma really work?
If you just want to stay on top of your credit score as you try to improve it, then Credit Karma will probably suit you just fine. In fact, it doesn’t matter too much which score you use in that case. You only need to track the changes in your score at that point. You don’t necessarily care about pinpointing your actual score.
How does Credit Karma compare with Experian?
While Experian compiles your credit report and determines your credit score, Credit Karma simply shows you credit scores and report information from Equifax and TransUnion. Think of it this way — Credit Karma is like a newspaper that writes about the credit scores other companies give you. But we have no influence over your scores.
What is the scoring model used by Credit Karma?
Credit Karma uses the VantageScore, which is created based on TransUnion and Equifax information. This score is a benchmark, but it isn’t the number used by most lenders when making loan decisions. Instead, many lenders use FICO scores, calculated by the Fair Isaac Corporation, for making lending decisions.
How can Credit Karma help you improve your credit score?
Credit Karma is a useful tool for those looking to improve their credit scores. It provides free credit monitoring through daily or weekly updates to your VantageScore. VantageScores might be higher than FICO scores due to differences in calculation methods. Credit Karma can help you identify areas for improvement and track your progress.
Is Credit Karma used in lending?
Only one of Credit Karmas scores are used in lending and it is an old version. The other scores are not used in any lending transactions so they can’t be compared. Credit Karma only uses Trans Union data so it does not take into consideration Experian or Equifax data which can be different. Most banks use FICO scores.
Why does Credit Karma show a higher credit score?
Why is my Credit Karma score higher than my FICO score? Credit Karma uses VantageScore, which is a different way of scoring credit, while FICO uses a different method. VantageScore may be more forgiving of certain negative factors or may react more quickly to positive changes like debt payoff.
How far off is Credit Karma from your actual score?
Credit Karma’s scores, which are based on the VantageScore model, can differ from the FICO scores used by many lenders. These differences can range from a few points to 20-50 points or even more.
Is Credit Karma or FICO score more accurate?
FICO scores are generally considered more accurate for lending decisions because they are the standard used by most lenders.
Which is more accurate, Experian or Credit Karma?
Both Experian and Credit Karma provide generally accurate credit scores, but they utilize different credit reporting agencies and scoring models. Experian provides your Experian credit score and report, while Credit Karma provides your Equifax and TransUnion credit scores and reports.