Don’t Trust Credit Karma

Is Credit Karma Wrong?

Though a useful tool, Credit Karma may not be as thorough as needed when applying for a home. The difference between your Credit Karma score and your FICO score can be several points and could affect your mortgage qualification.

Understanding Credit Score Discrepancies

Credit Karma is a popular tool for monitoring your credit score, but many users find discrepancies between their Credit Karma score and their FICO score, particularly when applying for a mortgage.

Why Credit Karma Scores Differ

The short answer is yes, Credit Karma scores can be inaccurate to some degree. Many borrowers report different scores on Credit Karma compared to the true tri-merge credit score used by mortgage lenders. This discrepancy arises because there are 55 different algorithms used to calculate credit scores. The mortgage industry uses one specific algorithm, while Credit Karma and other reporting agencies use various others.

Different Scoring Parameters

One key difference is the scoring range. Credit Karma's scoring model goes up to 900 points, whereas the FICO score used for mortgage applications only goes up to 850 points. This broader range can result in higher Credit Karma scores that don't accurately reflect your true credit standing.

Surface-Level Reporting

Credit Karma often does not pick up derogatory accounts or collections, focusing mainly on currently active accounts. This means that while Credit Karma might show a score of 700, a mortgage credit pull might reveal a score below 700 due to collections or other negative items not reported by Credit Karma.

The Value of Credit Karma

Despite these discrepancies, Credit Karma is still a useful tool. It is great for tracking your credit score trends and monitoring your credit utilization. However, it should not be relied upon for making major financial decisions, such as applying for a mortgage.

What to Expect

If you have no collections or other significant negative items on your credit report, your Credit Karma score might be fairly close to your FICO score. However, if you have past collections or derogatory marks, your true credit score could be significantly lower than what Credit Karma reports.

Improving Your Credit Score

For those looking to improve their credit score, Bryce Gonser advises being aware of these discrepancies and understanding how different scoring models work. If you have questions about boosting your credit score or need advice on improving it, reach out to experts like Jesse and Bryce.

In summary, while Credit Karma is a valuable tool for monitoring your credit, it is not always accurate for mortgage applications. Understanding the differences in scoring models and what each pulls from can help you better prepare for major financial decisions. If you need more information or assistance with your credit score, don’t hesitate to contact experts in the field.

 

Dont trust Credit Karma

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