At this point, everyone is aware that a good credit score is beneficial; it can literally save
you thousands of dollars when you finance big-ticket items. For those of you who don’t know,
you are entitled to receive a free copy of your credit score from the big three Credit Reporting
Agencies (“CRAs”); Equifax, TransUnion, and Experian once per year (click here to request
yours). Until April 2021, you can request a free online report every week. Notwithstanding this
knowledge, many people prefer to use Credit Karma rather than looking at the source; we
suspect it’s because Credit Karma skews credit scores up. Unfortunately, lenders don’t look at
your Credit Karma score, they look at the CRAs. This article will briefly discuss whether you can
trust your Credit Karma credit score.
To be fair, there are many CRAs out there, the big three just happen to be the ones that
major lenders rely on. To be forthcoming, there are also two types of credit scores (FICO and
VantageScore). FICO scores range from 300 to 850, higher numbers represent better credit. The
big three CRAs created the VantageScore in 2006, which used a different algorithm but comes to
a similar valuation (on a 300 to 850 scale). Like most things, the VantageScore has gone through
multiple revisions, all in an effort to create a more accurate picture of an individual’s
creditworthiness.
Lenders don’t always use the most current version of the FICO or VantageScore when
making their determinations. For example, the Federal Housing Finance Agency (“FHFA”) only
allows their lenders to use FICO Models 2, 4, and 5. Additionally, lenders typically look at your
credit report (which is a breakdown of how your credit score was generated, to keep it simple).
According to the company spokesperson, CreditKarma uses Vantage Score version 3.0.
To put it bluntly, the scores you see on credit score apps is an “educational” score; it’ll give you
the right ballpark, but don’t build your financial future around it. To answer the question posed at
the beginning of this article, “can trust your Credit Karma credit score,” the answer is a
resounding no.
As we noted at the beginning of this article, you are entitled to review your actual credit
score, the one used by the big three CRAs, once per year. During the COVID pandemic, until
April 2021, you can check your actual credit score once per week. It would be the equivalent of
eyeballing the size of your window that you’re looking to purchase drapes for when a tape
measure is literally in your hand; it makes no sense.
At the Chernov Team we understand that knowledge is power, and knowledge of how to
assess your actual financial standing is powerful knowledge indeed. At the Chernov Team we
know that whoever comes to the table most prepared leaves with the most, and the Chernov
Team always leaves the table with the most.