Why Your Free Credit Score Doesn’t Always Add Up
Your credit score makes the difference between being approved or rejected for a mortgage, car loan, student loan, or any other type of loan. There are plenty of online free credit score checker tools out there, and there’s no reason why you shouldn’t know the magic three-digit number. But how accurate are these online tools? Here’s what to know about the difference between the free credit score you get online and the score a lender uses before giving you a line of credit (or not).
Not all credit scores are the same
You don’t only have one credit score. Instead, you have several different credit scores derived from different models (or versions of models) used to calculate your creditworthiness. Most credit scores in the US come from one of two scoring agencies: FICO and VantageScore.
Free points from sites like Credit Karma or TransUnion are usually calculated using the VantageScore model. (Note: When you use a free credit scoring service, the scoring model must be listed along with your results.) However, most lenders see your FICO score. To complicate matters further, both scoring agencies update their models from time to time, and different lenders may use different versions of these models.
It all boils down to the fact that when you use a free service to get a credit score, chances are it’s not the number the lender is using. However, this does not mean that your free credit score is completely useless. The difference between your VantageScore and FICO scores is not a concern if you are in the same credit score range .
Your credit score range is what matters
The exact three-figure score you get will depend on the model you use, and it can go up or down depending on something like a missed payment or two. Instead of focusing on an exact number, what matters most is your credit score range.
For example, here is the score range that Credit Karma uses:
- Bad: 300 to low 600
- Fair to Good: Low 600 to mid 700
- Very good and excellent/exceptional: above mid 700
Compare this to the breakdown by FICO scoring model:
- Bad : 300-579
- Fair : 580-669
- Good : 670-739
- Very good: 740-799
- Excellent : 800-850
The only reason your VantageScore compared to FICO will affect you is because you have a borderline score, say something around 600, which you think is “good” but “fair” to your lender. The borderline score may or may not be relevant for loan approval.
bottom line
Free credit scores may not be entirely accurate, but they are still a useful tool for understanding your relationship with creditors. This is a free option to see if there is something seriously wrong with your credit profile, or to see if you have a borderline score that you should try to raise by a few points before taking certain financial steps. If you want to increase your score, read more here .