Why Is My Credit Score So Varied?

My husband and I are in the early stages of buying a home. For us, this means we recently met with a mortgage lender to discuss our finances and determine how much of a home we can afford. As part of this discussion, our mortgage lender wanted to talk to us about our debts, our savings, and our credit scores.

Since I work in the personal finance space, I had an idea of what my credit score was as did my husband, and truthfully, we were not all that concerned for our credit histories to be unearthed. We both are emailed updates about our credit score from Nerd Wallet as well as the credit bureau Experian on an almost weekly basis. Based on that information, we believed our credit was in decent shape.

It wasn’t until the mortgage lender mentioned that credit scores on consumer sites like Credit Karma inflate a consumer’s credit score by about 25 points that I began to panic that maybe my credit score wasn’t so great after all?

While my husband and I both understood that a hard credit check was going to provide different results from our free weekly credit score temperature check, I was startled by how large of a difference there could be from what I as a consumer was shown to what possible lenders were shown. So, I must admit I was feeling particularly seen when a few weeks later Credit Karma was trending on Twitter for this exact reason.

On a random Tuesday in January, thousands of memes dramatizing the variation between what a consumer believed their credit score to be and what it ACTUALLY was once they applied for a loan were shared using the hashtag #CreditKarma – just like the one below.

As luck would have it, there is an entire personal finance community on Twitter who not only saw the #CreditKarma hashtag trending but sprang into action to help explain the varied credit score numbers for the thousands of confused consumers.

“Guess what? You actually have dozens (even 100s) of credit scores,” tweeted Lynette Khalfani Cox. “There are 50+ FICO scores alone, Vantage Score + many lenders & insurers have their own scores too.”

“Credit Karma is taking a beating, but it’s unfair, IMO,” said personal finance freelance writer Kat Tretina. “There are HUNDREDS of different credit scores, and they all weight info differently, causing variations in [your] score.”

Why Is My Credit Score So Varied?

Before we dive deeper into how credit scores can be so varied, let’s just take a minute to remember the point of a credit score.

Traditionally, credit scores are used to determine how financially trustworthy a consumer is and how probable it is you’ll pay your debts. This is why a score in the “excellent” range (750 to 850) allows you access to the best interest rates, as well as the most generous spending limits and rewards programs when applying for new lines of credit such as credit cards, auto loans, or a mortgage.

“When you are scouring the internet for your credit score there are websites you can use to find those scores, even for free, but be warned they are not all created equal,” says Chase Peckham, Director of Community Outreach at the San Diego Financial Literacy Center and host of the personal-finance podcast Talk Wealth To Me.

“Popular sites such as Credit Karma, recently purchased by Intuit, are a great way to get your score, but they use a Vantage score which was created in collaboration with the three credit bureaus to compete with the FICO score,” Peckham explained.

“The Vantage score will give you a good indication of where your credit stands, but the FICO score is considered the industry standard as more than 90 percent of businesses that pull credit use FICO scores.”

Money and Travel Writer Ben Luthi agreed with Peckham’s assessment that the outrage directed at Credit Karma was the result of a misunderstanding with how credit scores are calculated. “Credit Karma’s product is valuable, and it’s one of the reasons we have such easy access to credit scores now,” tweeted Luthi, who has written freelance articles for Credit Karma.

“Before Credit Karma, getting a free credit score without applying for credit was virtually impossible.”

FICO vs. Vantage Scores

Currently, the FICO Score 8 is the most common version used to obtain credit scores, according to Peckham. Scores range from 300 – 850, 850 being the high end of the scale.

“Most lenders use FICO so that one is a better choice if you’re checking credit leading up to an application,” Luthi said. “You can get free FICO score access through Experian and Discover Credit Scorecard. You may also have it already through your bank or credit card company.”

Luthi also noted that most free credit monitoring services offer the Vantage Score, not FICO score, including NerdWallet, Credit Sesame, Credit.com, Capital One CreditWise, and even some paid services too.

“For the most part, [Vantage Score] considers many of the same factors as FICO. But there are some differences,” Luthi notes. “The biggest one I’ve seen if you have a high credit card balance relative to your limit, the [Vantage Score] punishes you more than FICO for that.”

As these experts have all noted, even when you’re getting your credit score using the FICO factors, you could end up with different results.

“Even more confusing for consumers is when lenders are looking at your credit, and they may be pulling the score from just one of the three bureaus: Equifax, Experian, or TransUnion, your score may be different from bureau to bureau because not all account information is reported to all three, so scores may vary,” Peckham noted.

“It also depends on what type of lending product you are applying for,” Peckham said. “There is a difference between applying for a credit card, a loan for purchasing a vehicle, and a mortgage to purchase or refinance a home. There are scores that are created for different industries.”

Is it Worthwhile to Know Your Free Credit Score?

“I think using multiple credit monitoring services is necessary, even if they all offer FICO scores because each one brings something different to the table,” Luthi said.

“I also think it’s important that we provide better credit education. It’s better than it has been, but people should not be surprised to see huge differences between what they see from their credit monitoring services and what lenders see.”

And as far as using free consumer credit reporting sites, Luthi says go for it.

“Credit Karma’s product is still valuable because of the credit report information. It’s not your full credit report but it gives you the info you need to address potential issues that could hurt your credit,” he said. “Credit Karma offers Equifax and TransUnion reports, which you can pair with Experian’s to get a full picture of what’s on all reports without needing to order the full reports.”

“Competition in the credit industry is good,” says Luthi. “FICO has had a monopoly for a long time. Over time, the [Vantage Score] may gain more traction with lenders, which I think is a good thing because it forces the entire industry to make better models.”

“Also, I’m happy to see that some companies, like Petal, are using alternative credit methods because credit scores themselves aren’t perfect. Expect that approach to become popular too.”

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