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Credit Karma vs FICO Score

Credit Karma vs FICO Score

In this article, we will discuss Credit Karma vs FICO score and how they affect your ability to get a loan from a borrower. defines the extent to which lenders and creditors find an individual credible and reliable enough to be offered a loan. Lenders favor a borrower who is dependable and reliable because of the unlikelihood of loan defaulting. Such an individual can access friendly interest rates.

A bulk of lenders use a scoring system to define creditworthiness calculated from various individual credit history elements. The Credit score is the single most significant determinant of creditworthiness. Credit Scores are generated from credit reports which the Credit reporting agencies normally issue. There are three main credit bureaus; Experian, TransUnion, and Equifax. Credit Karma is an online tool that issues Vantage credit scores. On the other hand, the FICO score is the most widely accepted and utilized score for lending in the United States. The subsequent paragraphs discuss the two scores and their distinguishing features. 

Credit Karma and the Vantage Score

Credit Karma vs FICO Score Which is better?

Credit Karma is an integrated digital platform that provides support and coordination of credit information. Credit Karma’s business model works around providing credit stability for its registered members. A registered member can access credit scores and credit reports from TransUnion and Equifax, two of three main credit reporting bureaus. The other credit reporting agency is called Experian. 

A vantage credit score is a rating developed by the three reporting companies to reflect an individual’s creditworthiness. The following elements are used to determine the calculation and outcome of a Vantage Score

Vantage Score groups credit information into six main categories, but the categories don’t have the same influence on your scores.

  • The individual’s Payment history
  • The Age and type of credit
  • Percentage of credit limit used
  • Total balances and amount owed
  • New credit and hard inquiries 
  • Available credit

Based on the preceding factors, a Vantage Score range is as follows.

Excellent (750 to 850)

Good (700 to 749)

Fair (640 to 699)

Poor (300 to 639)

In the Vantage Score calculation, the above elements are weighted from the most influential to the least influential. The Karma Credit Scores are accessible for free and can be obtained from the Credit Karma website.

Related: Credit Karma vs Experian

The FICO Score

 The FICO score is designed to reflect creditworthiness and credit risk by a carefully crafted data analytics formula that blends the five main factors that affect credit using different weight proportions. These five elements are; the history of payment, amount currently owed, the length of credit history, the credit mix, and new or latest credit. The weighting is done for this calculation also assigns a different percentage of influence. To monitor your FICO score you can use the myFICO app which will break down your FICO score in each category you are looking into such as a mortgage, auto loan, and more as 90% of lenders will be using these FICO scores to decide your creditworthiness.

The FICO Score runs a spectrum range of between 300 to 850 points.  The higher the number, the better the credit score. Any score below 580 is considered a poor score, 580 to 669 is considered fair, 670 to 739 is good credit history, and most lenders form the preferred threshold. 740 to 799 is very good and is a mark of a dependable borrower. Any score above 800 is exceptional and indicates that the individual is a highly dependable borrower. The FICO score is a product of the five considerations weighted by percentage as below

  • Payment history, 35%
  • Amounts owed, 30%
  • Length of credit history, 15%
  • New credit, 10%
  • Credit mix, 10%

Related: All You Need To Know About The FICO Score

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Credit Karma vs FICO Score

Although Credit Karma’s Vantage Score is not as widely used as the FICO, it can still give an accurate picture of creditworthiness. These two scores use almost the same types of credit history elements to reach their final verdicts. 

The Paramount similarity between the two scores is their ultimate goal. They serve the same purpose. They are designed to measure the likelihood that an individual will default on a debt. There are other scoring methods, and it is the lender’s choice which method they choose to determine if you should be approved for a loan or not.

Related – Credit Saint is one of the best credit repair companies that fixes your credit by removing negative information from your report. They work on FICO score as well as other scoring medals. It has an A rating at Better Business Bureau. Alternatives to Credit Saint are Disputebee, Lexington Law & Credit Repair Cloud.

What Are The Differences In Credit Karma vs FICO Score?

The differences between Credit Karma’s Vantage Score and the FICO score are relatively small.  The only difference is in the calculations. Payment history is ranked the highest in both the FICO score and the Vantage score so if you are paying your bills on time monthly that will have a big impact on your score.

The next big factor in your FICO is the amount you owe, which makes up 30% of your credit score, while the Vantage Score focuses more on the age and type of credit as well as credit utilization.

Related: What Happens If You Don’t Pay Your Credit Card Bill

Which Credit Score Is Better?

There is no credit score that is better than the other. About 90% of major lenders use the FICO score to determine your creditworthiness but that doesn’t mean the FICO is better. You should look at both scores on a regular basis.

When applying for loan, find out with credit score the lender uses and focus on that score because that is the score that will be determining if you are approved for a loan.

Ultimately the use of a specific credit score is a lender’s choice.  The figures obtained can never be identical across the board because of time and item-related differences across the reporting bureaus.

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