Regarding your credit score, you want the last thing to have to deal with to be an erroneous portrayal of your credit situation. But amongst choices from Credit Karma and FICO, which provides a better snapshot of your credit status as precisely as feasible? All the information you need to know about Credit Karma against FICO credit ratings and their dependability is broken out here.
What is the Credit Score?
Based on credit records, a credit score—a three-digit number—helps creditors evaluate the creditworthiness of a borrower. Usually, fico scores lie between 300 and 850 most of the time. Higher the number, the less risk involved and the more likely you are to be authorized for various credit facilities such credit cards, auto loans, even mortgages.
Data from three of the main credit reporting companies— Experian, TransUnion, and Equifax—forms basis for this score. The credit score a person obtains from companies like FICO as well as VantageScore is created using the credit report data.
Credit scores then help lenders decide whether to lend to you or not as well as the interest rates. Knowing and following your credit score is thus really vital.
What is Credit Karma?
Credit Karma is a website dedicated to personal finance with the possibility to get credit reports and VantageScore credit scores for free. VantageScores also utilize credit report information but do not employ FICO’s model to come up with the score.
To note, the website earns money by providing relevant recommendations. For instance, if you have checked your Credit Karma credit score, they are likely to recommend the type of credit card or loan you should apply for.
It is legit because Credit Karma employs TransUnion and Equifax reports to come up with the VantageScores. It does not offer Experian reports or FICO scores – at least not if you do not go for a paid subscription.
Using Credit Karma has its advantages, as you can monitor your TransUnion and Equifax scores every week for free. That assists you in keeping a check on credit more frequently.
What is the FICO Credit Score?
FICO has been dominant in credit scoring and is used in approximately 90 percent of lending decisions. All versions of FICO scores are still calculated between 300 and 850. However, the methods by which scores are computed have changed over the years.
Here’s a quick history of FICO scoring versions:
FICO 8: This was the industry standard for the better part of a decade after its release in 2009 and works on the five key factors of credit health namely; past credit behavior, credit utilization, length of credit history, new credit, and credit mix.
FICO 9: Debut in 2014, FICO 9 focused on the same aspects but failed to consider every collection account and medical bills for a more merciful approach toward users still in the process of paying off their credit.
FICO 10 and 10T: At the moment, the latest is FICO 10 and FICO 10T which was launched in the year 2020. FICO 10 also gives more importance to the latest credit information than the previous versions of FICO scores. FICO 10T also places greater emphasis on the repayment of telecommunications and utilities in particular.
All versions balance the same five baskets of credit data but arrive at the final number in a slightly different manner. Auto lenders tend to employ older models more often than mortgage lenders while credit card issuers tend to prefer the most recent models.
Which is More Accurate: Credit Karma or FICO?
In the Credit Karma versus FICO debate, the latter wins when it comes to the accuracy of the scores. However, that does not imply that Credit Karma scores are irrelevant or inconsequential.
Here’s how the two score sources compare:
- Industry Standard Usage
FICO scores remain the credit standard that 90 percent of top lenders rely on in their decision-making. To sum up, FICO is also used by federal housing and loan agencies. And if you want the very same scoring assessment that your bank has, then FICO is the answer.
However, VantageScores are a small step towards updating scoring models. However, some lenders refer to VantageScores together with FICO anyway.
- Calculation Methodology
Thus, it is crucial to remember that FICO and VantageScore models are based on the same five fundamental credit data fields but employ distinct algorithms.
The recipe for performing calculations that FICO has been using is backed up by several years of historical borrower data. VantageScore is newer, so the mathematics used is not as mature as the one used in FICO.
Cost and Accessibility
Both score types are available in free and paid sources; however, they have different frequency limits. To get your FICO, you will need to spend money on a credit monitoring service or purchase a one-time report. However, Credit Karma offers constant and unlimited access to VantageScores free of charge.
- Score Scale Consistency
While there are slight differences in facilities offered by the various models, FICO scores are always between 300 and 850. The VantageScores also keep the range of 300 to 850, but with minor changes that may be more important to suppliers than users.
- Variability Between Bureaus
FICO and VantageScore are two different models that create different scores for Equifax, TransUnion, and Experian credit reports. You do not have a single perfect score that you can work with, and have to negotiate with. However, variation between bureaus is often smaller for FICO than for VantageScore, which helps to explain why FICO is considered to be more accurate.
Takeaway: Check Both, but Different
There are differences between the FICO and VantageScore models. However, if you can check both regularly then you can get a useful credit outlook. It just means that as long as you are aware that they employ distinct scoring logics, using Credit Karma in addition to tracking your actual FICO scores is informative.
Pay more attention to how you are performing over the long-term period rather than individual scores. Getting better is better for your financial situation than any specific numerical result. Besides, no scoring model dictates one’s whole financial identity or restricts one from borrowing funds.
Therefore, begin with Credit Karma as it is free and has a simple user interface. But also buy a one-time or subscription right to your actual Fico scores using a free trial from sites like Experian, Discover Credit Scorecard, or Myfico. Considering both as valuable insights into the progressive state of your credit health is a fair approach.
Call now for expert credit repair services: (888) 803-7889
Read More:
How long does it take to go from a 500-credit score to a 700-credit score?
How do I clean up my FICO Score?
How can I fix my FICO Score fast?
How can I raise my FICO Score 50 points?
What is a good FICO auto score?
