Credit Reporting Law, Credit Reporting History
Cento Law
Credit Bureaus Unveiled: The Power, ...
Credit Bureaus Unveiled: The Power, Consolidation, and Consumer Struggles from 1970 to Today
Credit Reporting Law, Cento Law
Cento Law
FCRA - The Fair Credit Reporting Act
FCRA - The Fair Credit Reporting Act
Credit Errors, Credit Report
Cento Law
HOW TO DISPUTE INACCURATE INFORMATION ON YOUR ...

Disputing Inaccuracies

HOW TO DISPUTE INACCURATE INFORMATION ON YOUR CREDIT REPORTS
Credit Report
Cento Law
How to Begin a Credit Repair Process Yourself

A start to fixing credit yourself

How to Begin a Credit Repair Process Yourself
Credit Scoring
Cento Law
Credit Scores: How They Generally Work

The lending industry has many different types of credit scores on the market today. Many different vendors have created them, such as Fair Isaac, the three national repositories, credit grantors, and insurance companies. 

Credit Scores: How They Generally Work

FICO Score

Twitter Shredded by Credit Karma's Comically Inaccurate Scoring

Last week, Twitter was bombarded with consumers expressing their (hilarious) frustrations concerning their credit scores provided by Credit Karma, the personal finance company owned by Intuit. 

The frustration comes from users realizing that Credit Karma is providing them with lower credit scores than what is found on their credit reports. 


Consumers were tweeting about applying for credit cards, loans, and attempting to purchase vehicles thinking that they had good or excellent credit, only to find out that the credit score that the issuer pulled was lower than what they had found on Credit Karma. The tweet that started the meme trend can be found here.  


Twitter users were quick to share and create memes about how their credit score was inflated on Credit Karma. @RiotGrlErin had even tweeted “checking your credit score on credit karma is like checking your symptoms on WebMd.”


But, users were on to something important when it comes to checking your credit score. There are many reasons why your credit scores differ between what a personal finance website tells you and what lenders or credit card companies find. There are mainly two reasons: For one, a lender may pull your credit from different credit bureaus, either Equifax, Experian, or TransUnion. Your score can differ depending on which bureau your report is pulled from, since they do not all receive the same information about your credit accounts. Secondly, there are different credit score models and versions that exist across the board. 


Credit Karma’s website states that they use the VantageScore® 3.0 model. VantageScore may look at the same facts that the other popular FICO scoring models does, such as your payment history, amounts owed, length of credit history, new credit and your credit mix but each scoring model weighs these factors differently. Because of this, VantageScore and FICO Scores tend to vary from one another. The VantageScore® 3.0 on Credit Karma will likely be different from your FICO Score that lenders use most often. If you are planning on applying for credit, make sure to check your FICO score since there is a good chance that lenders will use this to determine your creditworthiness. FICO Scores are used in over 90% of U.S. lending decisions. It is important to note that there are also industry-specific FICO Scores to look at when you are planning a specific purchase. For example FICO® Auto Scores are ideal if you are wanting to finance a car with an auto loan. If you are planning to buy a house you should look at FICO® Scores 2, 5 and 4. 


The best way to look at your scores is to visit www.annualcreditreport.com where you can access and download your reports from Equifax, Experian, and Trans Union. Due to Covid, your report is free to access once a week until April 2021. 

Feel free to shoot us a message for any questions!

Credit Scores - FICO and VantageScore

FICO Score

According to court filings by Fair Isaac, the creator of the FICO score (the dominant and most well-known consumer credit score in the United States), a “Credit Score” is a representation of an individual consumer’s financial creditworthiness that quantifies the risk that a consumer will fail to repay a loan or other credit obligation. “Credit Scoring” is the process by which an algorithm, or set of algorithms is applied to Aggregated Credit Data to generate a Credit Score.

“Aggregated Credit Data” is the historical records of an individual consumer’s borrowing and repayment as reported to credit reporting agencies by multiple lenders and servicers of loans. “Aggregated Credit Data” is separately compiled, reported, and sold by Equifax, Experian, and Trans Union (collectively, the "Consumer Reporting Agencies"), with such activity representing the core of their respective businesses.  Credit reporting in the United States is entirely voluntary and, therefore, the Consumer Reporting Agencies depend on major financial institutions, other lenders, and merchants to provide data.