Is credit karma accurate?

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Is Credit Karma accurate?

 

Credit Karma claims to give you your credit score but how reliable and accurate is it? Credit Karma will provide you with the exact same information a lender would access when you apply for a mortgage, or a car loan. Is it offering you any information you don’t have elsewhere?

First, you must understand Credit Karma and its purpose. Next, learn how the Vantage Score differs to the more familiar FICO Score.

KEY TAKEAWAYS

  • Credit Karma offers you a free credit score, credit report and information about your spending habits in return for your credit score. The company then charges you to display targeted ads.
  • Credit Karma’s scores and credit report information are derived from Equifax and TransUnion, two of the three largest credit bureaus.
  • Credit Karma calculates its Vantage Score using this information.
  • Credit Karma scores should be equal or near your FICO score. This is what prospective lenders will likely check.
  • It is important to consider the range of your credit score, such as “very good” or “good”, rather than the exact number. This will vary depending on where it comes from and how often you use it.

What is Credit Karma?

Credit Karma is most well-known for its free credit scores, credit reports and other services. It is also known for its free credit scores and credit reports. However, Credit Karma positions itself as a website that gives users the chance to create a better financial future. “3

Credit Karma requires that you provide basic personal information. This includes your name and last four digits from your Social Security number. Credit Karma will access your credit reports and compile a Vantage Score.

Is Credit Karma accurate?

FICO is , the most well-known credit score. However, many people don’t realize that FICO doesn’t actually collect any information. FICO is a model that uses the files of three major credit bureaus to calculate a score.

Credit Karma’s Vantage Score is based on the same process but its scoring model was created by the credit agencies. Vantage Score, although less well-known to the general public, claims to score 30,000,000 more people than any other model. This could be a significant factor if you are young or recently arrived in the U.S.

Credit Karma doesn’t operate as a credit bureau. They don’t collect information from creditors. Credit Karma’s credit scores and reports reflect the credit information that was reported by Equifax and TransUnion, two major consumer credit bureaus. These scores do not represent your credit rating and are therefore not an estimate. 6

Credit Karma Vantage Scores

Investopedia reached Out to Credit Karma in an attempt to understand why Credit Karma should be trusted to give consumers a credit score that accurately represents their creditworthiness.

Bethy Hareman was the former chief consumer advocate for Credit Karma. She said: “The scores, credit report information and Credit Karma scores come from TransUnion, Equifax, and two of the three main credit bureaus.”

“We provide Vantage Score credit scores independent from both credit bureaus. Credit Karma selected Vantage Score as it is a collaboration between all three major credit bureaus. It’s transparent scoring model that can help consumers better understand credit scores changes.

Is it Vantage Score, FICO or Both?

Vantage Score does not represent Fair Isaac Corporation. FICO stands to Fair Isaac Corporation. This is the largest competitor in the creation of scoring models that can be used to rate consumers’ creditworthiness. 7 To make matters more complicated, lenders and lenders both use different versions of their models with slightly different results.

The score for each model should be approximately the same. Unpaid medical debt may be assigned a slightly different weight by one model. It may take longer for one model to approve a loan application. However, if your credit score is good or very good according to one system it should be the exact same in the other.

FICO and Vantage Score are two software programs that use consumer spending history to calculate credit ratings. FICO and Vantage Score are both software programs that calculate credit ratings based on consumers’ spending and payment history.

Your Vantage Score, which is a combination of different models, will undoubtedly be slightly different from your FICO score. You may receive a different FICO score depending on which source you use, whether it uses a more specific FICO model or the most commonly used base model, and which version.

Your score on all models should be within the same range. A “good” Vantage Score is not acceptable, but a fair FICO score is.

The Key Differences between FICO Score and Vantage Score

The differences in the FICO Score and Vantage Score are very minor

    • Vantage Score helps you keep track of credit users who are new or infrequent. This is a benefit for young adults and anyone who has fallen off the consumer radar.
    • The lender will check your credit rating before you apply for a loan. Multiple applications must be treated as one question under consumer protection law so you don’t get dragged multiple times for comparison shopping. Vantage Score might be a bit more harsh than FICO because they handle these queries differently.
    • Both create a credit score as soon as it is requested. FICO relies on current information that is submitted to credit bureaus. The Vantage Score system includes information about your spending habits over the past two year

Similarities between FICO Score and Vantage Score

FICO and Vantage Score share the same goal: to predict whether a consumer will default in 24 months. 11

You shouldn’t be too concerned about the differences. Each credit score should be within the same range but will never be identical.

Different lenders use different scores. You can’t know which score they will choose so it doesn’t matter what score you use–FICO, Vantage Score. There are many scoring models, and it is difficult to keep track of all of them.

Other Credit Karma Services

Credit Karma will retrieve your credit information from Equifax and TransUnion, which are two of the three largest consumer credit agencies. The third is Experian. It will then generate its own independent rating using Vantage Score. The Vantage Score rating will be updated and you will receive the credit reports. 12

Credit Karma offers this service for free. Many other top credit monitoring services offer similar alerts.

Credit Karma allows you to search for personalized offers for credit cards, car loans, or home loans by sharing your personal information. Your search will not appear in Credit Karma’s credit report or elsewhere. The standard section of credit reports, “inquiries,” lists any requests you have made from lenders for loans. Credit Karma allows for you to limit how many inquiries you make.

Credit Karma offers personal recommendations for money management. Example: “Your car loan is 16%. It’s possible that you are overpaying!

Credit Karma makes money

Credit Karma’s business model does not seem entirely altruistic. Credit Karma is a for-profit company that makes money by providing you with a credit score for free in exchange for learning about your spending habits, and charging companies to display targeted ads.

Credit Karma puts advertisements in front its users, hoping they will click on them. Credit Karma might earn a fee if someone applies through one of its links.

Advertisers pay more to target your personal data. 14 has more than 100,000,000 users.

Credit Karma Drawbacks & Limitations

First, you should ask yourself if Credit Karma has any services that are free. This will depend on how urgent you require detailed information about your credit standing. Remember:

    • You have the legal right of a copy of credit scores and reports from all three credit bureaus, once per 12 months. 15
    • Many lenders and banks offer account holders access on-demand to their credit scores. If you have an American Express credit card, click Account Services to see your FICO score.

This is enough for most people most of the times. This access will allow you to view your credit report, and the associated services Credit Karma provides, if you are applying for a mortgage or trying to improve your credit rating.

Your Credit Karma Score may be insufficient

Credit Karma allows you to track your credit scores and see if they change each day. It all depends on the time your lenders report to credit bureaus. On Credit Karma, you can check your TransUnion credit score every day. 17

Vantage Score’s system may be accurate, but it is not industry standard. Credit Karma is fine for most consumers, but companies that approve or deny applications will be more likely to consider your FICO score.

Credit Karma may encourage borrowing

Credit Karma’s business model involves earning advertising revenue and commissions on any loans that you obtain through the site. The site is a trusted advisor, but it is motivated to sign you for new loans.

Credit Karma is used to track your credit score and not to give advice about whether or not you should take out new debt.

Is Credit Karma really free?

Yes.

Is FICO used in Credit Karma?

No. However, Credit Karma’s credit score will be similar to your FICO score. 18

Is Credit Karma safe?

Yes. Credit Karma uses 128 bit encryption to protect data transmissions. This encryption is almost impossible to crack. Credit Karma also promises not to sell your data to third parties 19.

What is the difference between my FICO scores and my credit karma?

FICO and Vantage Score are the main competitors in the credit rating industry. Vantage Score is used by Credit Karma. Credit Karma uses Vantage Score.

Credit Karma works with two of the three major credit agencies and scores your creditworthiness using the Vantage Score system. 6 You should have the same score everywhere else, even with its many competitors.

Consumer Affairs has some customer reviews that show people reporting that their Credit Karma score was higher than their FICO scores. 20 It is not known if these reports are reliable, but it is worth noting.

Your Credit Karma score may not be accurate. This means that one bureau made an error, or left out information. Oder, the information may have been reported to only one bureau.

Who owns Credit Karma

Credit Karma was founded by Kenneth Lin and Ryan Graciano in 2007. 21

Intuit, which is behind TurboTax, completed the acquisition of Credit Karma in December 2020. This transaction involved approximately $3.4 billion cash, 13.3 million shares Intuit stock, and equity awards totaling $4.7 billion. 22

The bottom line

Credit Karma is used by millions of people to track their credit scores. Vantage Score is the company’s service provider. The company is transparent. It provides a reliable snapshot about your credit standing. Credit Karma can be used to identify inaccuracies within your credit report. Hardeman recommends that you be proactive about monitoring your credit reports to spot inaccuracies and fraudulent information. Before applying for credit, make sure to dispute any inaccuracies.

Remember that Credit Karma is not the only option. An update may be offered online by your bank or credit card issuer. And, you have a legal right to a full copy of your credit report once a year,15 available at AnnualCreditReport.com. Credit Karma is also able to help you find loan products. A service that gives you a current credit score and current offers can be very helpful if you are looking for a loan. These offers are Credit Karma’s bread and butter. Advertisers are keen to lend money to you, which may not be the best for your credit score.

 

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