Twitter users are upset about Credit Karma's credit scores—here's why (2024)
On Tuesday afternoon, consumers took to Twitter to express their frustration over their credit scores on Credit Karma, the personal finance company owned by Intuit.
The issue for most wasn't that the credit scores they were finding on the Credit Karma website were low—rather they were too high.
Consumers tweeted about going to apply for a credit card or loan thinking they have good or excellent credit, only to soon find that the credit score that the card issuer or lender pulled was lower than what they saw on Credit Karma.
The specific tweet that started off the conversation can be found here. Twitter users were quick to follow up and joke about how inflated their credit scores looked on Credit Karma.
This is mainly because of two reasons: For one, lenders may pull your credit from different credit bureaus, whether it is Experian, Equifax or TransUnion. Your score can then differ based on what bureau your credit report is pulled from since they don't all receive the same information about your credit accounts. Secondly, different credit score models (and versions) exist across the board.
As it states on its website, Credit Karma uses the VantageScore® 3.0 model. VantageScore may look at the same factors that the other popular FICO scoring model does, such as your payment history, your amounts owed, your length of credit history, your new credit and your credit mix, but each scoring model weighs these factors differently.
For this reason, VantageScore and FICO® Scores tend to vary from one another. Your VantageScore® 3.0 on Credit Karma will likely be different from your FICO Score that lenders often use.
If you plan on applying for credit, make sure to check your FICO Score since there's a good chance lenders will use it to determine your creditworthiness. FICO Scores are used in over 90% of U.S. lending decisions.
Take note of the FICO Score version you look at as well. The FICO® Score 8 is widely-used and can help you gauge which credit cards you qualify for. But there are also industry-specific FICO Scores to use when you are planning a certain purchase. For example, FICO® Auto Scores are ideal if you want to finance a car with an auto loan, while it's good to check FICO® Scores 2, 5 and 4 if you plan tobuy a house. Check out the full list of FICO's score versions for different financial products here.
*Results may vary. Some may not see improved scores or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
I've spent a good chunk of time delving into the intricacies of credit scoring, so let me walk you through the concepts laid out in that article.
First off, credit scores are a sensitive topic for many, as evident from the frustrated consumers on Twitter. The article discusses the discrepancies in credit scores reported by Credit Karma compared to those used by lenders. Now, why does this happen?
There are two main reasons, both rooted in the complex world of credit reporting. One, lenders may pull information from different credit bureaus—Experian, Equifax, or TransUnion. These bureaus don't always have the exact same data, leading to variations in the credit scores they generate. It's like comparing apples from different orchards; they might look similar, but there are nuanced differences.
Secondly, and this is a crucial point, different credit score models exist. Credit Karma, as the article highlights, uses the VantageScore® 3.0 model, whereas lenders often rely on the widely recognized FICO® Scores. These models consider similar factors—payment history, amounts owed, length of credit history, new credit, and credit mix—but they weigh these factors differently. It's like having two chefs using the same ingredients but creating distinct dishes.
For someone gearing up to apply for credit, especially a credit card or loan, it's emphasized that checking your FICO Score is crucial. FICO Scores hold sway in over 90% of U.S. lending decisions, making them the go-to reference for lenders assessing your creditworthiness.
Here's where it gets even more nuanced—the FICO Score isn't a monolithic entity. There are different versions tailored for specific purposes. The article mentions the FICO® Score 8, widely used for general credit assessments, and specialized scores like FICO® Auto Scores for car financing or FICO® Scores 2, 5, and 4 for home purchases.
To wrap it up, the article provides some tips on how to access your FICO Score for free. Banks and credit card issuers like American Express or Bank of America often offer this service. Additionally, online resources such as Experian Boost™ and Discover ScoreCard provide free access to your FICO Score, regardless of whether you're a cardholder or not.
So, if you're navigating the labyrinth of credit scores, remember: it's not just about the number; it's about understanding the game being played with different rules by different players.
On Tuesday afternoon, consumers took to Twitter to express their frustration over their credit scores on Credit Karma, the personal finance company owned by Intuit. The issue for most wasn't that the credit scores they were finding on the Credit Karma website were low—rather they were too high.
The Federal Trade Commission (FTC) alleged that Credit Karma tricked consumers into believing they were “pre-approved” for a credit card or had “90% odds” of approval, but in many cases, the consumers didn't qualify.
If your Credit Karma score isn't accurate, the problem is probably elsewhere. That is, one of the bureaus made an error or omitted information. Or, the information might have been reported to one bureau but not others.
Here's the short answer: The credit scores and reports you see on Credit Karma come directly from TransUnion and Equifax, two of the three major consumer credit bureaus. The credit scores and reports you see on Credit Karma should accurately reflect your credit information as reported by those bureaus.
Checking your free credit scores on Credit Karma doesn't hurt your credit. These credit score checks are known as soft inquiries, which don't affect your credit at all. Hard inquiries (also known as “hard pulls”) generally happen when a lender checks your credit while reviewing your application for a financial product.
This is mainly because of two reasons: For one, lenders may pull your credit from different credit bureaus, whether it is Experian, Equifax or TransUnion. Your score can then differ based on what bureau your credit report is pulled from since they don't all receive the same information about your credit accounts.
The FTC alleged that many people who got “pre-approved” credit offers from Credit Karma were not approved. As a result, they wasted time applying and sometimes saw their credit scores drop when their applications were denied.
If you are viewing your score on Credit Karma, the score you see is VantageScore® 3.0. While VantageScore® credit scores aren't used as widely as FICO® scores for credit decisions, they can still give you a good idea of where your credit stands.
The answer is easy. Credit Karma uses a different scoring system than the one mortgage lenders use. There are two main scoring systems: FICO – it was created in the 1950s and is used by mortgage lenders.
They may differ by 20 to 25 points, and in some cases even more. When Credit Karma users see their credit score details, they are viewing a VantageScore, not the FICO score that the majority of lenders use. A VantageScore has the same credit score range as FICO, and uses some of the same information as a FICO score.
It means you can trust the company with your personally identifiable information (PII). Credit Karma collects as little data about you as it can while still providing its services. More importantly, its privacy policy pledges never to sell that information to anyone.
As someone with a 650 credit score, you are firmly in the “fair” territory of credit. You can usually qualify for financial products like a mortgage or car loan, but you will likely pay higher interest rates than someone with a better credit score. The "good" credit range starts at 690.
You'll typically need a credit score of 620 to finance a home purchase. However, some lenders may offer mortgage loans to borrowers with scores as low as 500. Whether you qualify for a specific loan type also depends on personal factors like your debt-to-income ratio (DTI), loan-to-value ratio (LTV) and income.
In September 2022, the FTC announced an enforcement action against Credit Karma, alleging that the company used claims that consumers were “pre-approved” for a credit card or had “90% odds” of approval to entice them to apply for offers that, in many instances, they did not qualify for.
Every late payment shows up on your credit score and having a history of late payments combined with closed accounts will negatively impact your credit for quite some time. All you have to do to break this habit is make your payments on time.
It provides free access to credit scores and other credit services as well as personalized recommendations for credit cards, loans, and insurance. It makes the majority of its money when people click through its site and complete transactions for financial products offered by other providers.
When you open a Credit Karma Money Spend account, your funds will be deposited into an account at MVB Bank, Inc. and its deposit network. MVB Bank, Inc. is a member of the Federal Deposit Insurance Corp., and funds in your Spend account are FDIC-insured up to $5,000,000.
Introduction: My name is Geoffrey Lueilwitz, I am a zealous, encouraging, sparkling, enchanting, graceful, faithful, nice person who loves writing and wants to share my knowledge and understanding with you.
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