What to Know About Credit Karma Scoring
Are you thinking about buying a home or a car? Do you have some credit scoring issues that have prevented you from getting the best interest rates on credit cards and other loans in the past? If this sounds like you, signing up for Credit Karma could help. Credit Karma is in the business of helping people with bettering their financial standing. They do this by providing practical advice before you make a bad credit decision.
For example, should you cancel a credit card? Will canceling the card raise your credit score or make it go down? These are the kind of credit decisions Credit Karma will help you navigate. In the process, the company will also provide your credit score as well.
One question that comes up all the time is how accurate is the credit score on Credit Karma. Credit scores have existed for years. At one point, it wasn’t so easily accessible like it is now, thanks to free apps you can get on your mobile device.
But now that we have this much access, can the number displayed on apps like Credit Karma be trusted?
Well, let’s talk about some of the possible limitations.
Some History of Credit Scores
Before we talk about possible limitations, we want to go over some of the histories behind credit scores, so you can get a better idea of where they came from in the first place and why they are even used.
Fair, Isaac, and Company developed the first credit check, referred to as F.I.C.O in the 1950s. It wasn’t until 2003 that the FACT Act allowed everyday users to get one free credit report from the three credit bureaus.
For a so-called reasonable price, they could add F.I.C.O scores to their report. Though this progressed even more in the following years, and as of 2008, Credit Karma started allowing people to check their relevant credit score online for free.
After signing up for an account, you could view your own credit score whenever you wanted to. Although this sort of thing is pretty much invaluable to everyday users, it does come with its own limitations, which we’re going to get into right now.
Credit Karma Uses Vantage 3.0 Scoring Model
Before we take a gander at how accurate these scores are, how about we define what a crediting score actually is first.
This score gives banks an image of your financial soundness, as it represents your financial history without them needing to look too deep into the facts. The credit score shown does all the heavy lifting and pretty much tells them all they need to know about you.
It is based on things like credit card usage and payment history. Moneylenders regularly depend on a financial assessment like this to decide whether you can be trusted to take out another loan.
If your score is below standard, your application may get dismissed. When your score is higher than needed, you’ll probably qualify – and may even see favorable rates due to your excellent credit standing. When you are getting pre-approved for a home mortgage, you’ll be paying for years, which can save you a lot of money.
One individual can have different FICO ratings, and as mentioned previously, there are 3 credit bureaus available (Experian, Transunion, and Equifax). Your scoring records at each might be somewhat unique from one another. Rarely are credit scores ever identical.
Additionally, credit scores are different based on the model which each company is using. We mentioned these already mentioned as the F.I.C.O and Vantage 3.0. Though there is a biased in the industry, more than 85% of money-lenders prefer to use the F.I.C.O model when assessing whether or not you are worth lending funds to.
FICO Credit Scores and Vantage 3.0 Scores Are Different
Although, the issue with this model is that although it has the same scoring range as the F.I.C.O score, the algorithm differs slightly, which means that the viewer may get a different score than the lender sees when they request credit.
As discussed, this is because a lot of lenders are using a different scoring model.
You need to know what score model the lender is using before you apply for a financial loan because even if the overall score differs by a couple of points, it could move you to a completely different threshold and affect the loan you’ve applied for.
With all this being said, Credit Karma can be trusted to track your credit score accurately, but it may not match exactly to the F.I.C.O scoring model, which more lenders in the industry use.
You’ll Only See Info From 2 out of The 3 Credit Bureaus Available
The second restriction of Credit Karma’s is that it displays your data from just two of the free credit bureaus mentioned earlier. The scoring you see depends on the information from Equifax and TransUnion.
If you need to see your score data from every one of the 3 credit authorities, you can arrange one free yearly report from all 3 at AnnualCreditReport.com. This will cover your monetary history, yet it won’t list the score from each of the 3 companies already mentioned — to add this to your report, you’ll pay an extra charge to each credit bureau.
Your Credit Score Won’t Update Immediately
When you sign up with Credit Karma, you’ll get messages provoking you to see your scores from time to time. You’ll likewise get advised if there’s been a significant change to your overall credit score.
But you will not see changes constantly regardless of what might have happened to your credit-scoring since Credit Karma only refreshes your scores once per week.
It may not also have the most accurate information that a mortgage company would use, which can be slightly annoying if you’re seriously looking into lending finances shortly. You’re not just there to look at how good/bad your credit score has gotten.
Though this generally just needs some time to update fully, so ideally, we recommend meeting Credit Karma with a little bit of patience.
Is Credit Karma Worth Signing Up For?
As you can see from this post, Credit Karma is definitely accurate, although, like most applications, it comes with its own limitations.
Credit Karma offers you a great tool to stay somewhat up to date your credit score, regardless of who you are, along with ways in which you can actually improve this score to give you a better chance at getting the funds you need.
However, if you’re getting ready to apply for a home mortgage soon, you should track down additional information as Credit Karma will not provide it all. The lender who pre-approves you for a mortgage will end up running your credit. Your Credit Karma score certainly will not be the same as what the lender pulls. It should, however, give you a ballpark figure.
Hopefully, you now have a better understanding of how Credit Karma works. When used properly, it should be able to put you on the right track financially.