Today on MYM360 – Are Credit Karma scores real and do lenders use them? I got a question from a listener who wanted to know what they were getting with Credit Karma info. He went on to say, “If you get what you pay for, what does that mean in this instance?” And, do creditors use the score you get from them when making lending decisions?
Well, for an answer, I turned to one of my favorite resources – Investopedia. According to them, Credit Karma provides members with a VantageScore 3.0 credit score. They chose VantageScore 3.0 because it’s a collaboration among all three major credit bureaus and is a transparent scoring model, which can help consumers better understand changes to their credit score. In 2014, over 2,000 lenders, including six of the ten largest banks, used nearly one billion VantageScore credit scores to judge consumers’ creditworthiness.”
The number of banks using VantageScore, according to the company, increased 24% in 2014. However, more than 90% of lending institutions use the FICO score to make decisions, FICO reports. In 2014, FICO sold 11 billion scores. So FICO is used more often and the Vantage score may not match up with your FICO score because they use different methods to calculate your score.
However, regardless of the score you use, they present the argue that your FICO score, the score you receive from each of the three major credit bureaus and your VantageScore are probably all in the same range and it’s impossible to know which ones creditors will use. And, according to Bethy Hardeman, chief consumer advocate at Credit Karma, the most important thing is to stay proactive and monitor your credit regularly so you can catch inaccuracies or fraudulent information. Make sure you dispute these inaccuracies before applying for credit.
So what does Credit Karma get out of all of the free stuff they give you? Well, they get to show you really targeted ads because they know so much about you. So imagine what advertisers would pay if you had 40 million users and you could target the ads based on the spending habits of people.
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Thanks so much for listening and as always remember that minding your money really is the path to a richer life!