After seeing one of their many enticing commercials while watching your favorite show, you may be tempted to check out your free Credit Karma score. Who wouldn’t be? Your credit score comes back, much higher than you expected- and you’re on cloud nine! Then, you go to apply for a credit card, or a home loan and you find that your score pulled was drastically lower than what Credit Karma told you. Why is that?
There are multiple reasons why your credit score differs between what a personal finance website tells you and what your credit card company or a prospective lender pulls. One of the main reasons is lenders may pull your credit from the three main credit bureaus: Experian, Equifax, and TransUnion, while Credit Karma only works with Equifax and TransUnion. Not all bureaus receive the same information about your credit accounts, making your score differ. Another reason is different credit score models (and versions) exist across the board.
Both VantageScore® and FICO® credit-scoring models use data obtained from consumer credit reports to generate credit scores. Both models group your information into categories, each of these categories having influence over the other. Credit Karma uses the VantageScore® 3.0 model which looks at:
- Payment history (extremely influential)
- Percentage of credit limit used (highly influential)
- Age and type of credit history (highly influential)
- Total balances and debt (moderately influential)
- Recent credit behavior (less influential)
- Available credit (less influential)
FICO® Scores are used in over 90% of U.S. lending decisions. So, 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. While there are different versions, the FICO® Scores 8 and 9 are widely used and can help you gauge which lines of credit you qualify for. For a full list of scoring models and which fit best for you, check out the list here.
Regardless of the differences between FICO® and VantageScore®, the essential advice for keeping your credit score high remains the same:
- Avoid late payments. Pay your bills and pay them on time.
- Keep your credit balances low. Don’t max out your credit cards and try to keep your overall utilization balance to less than 30% — the lower the better.
- Apply for new credit only when you must. Don’t open a bunch of new cards in a short period of time, and don’t close old accounts without good reason.