Credit Karma gives you a free copy of your credit score just for signing up, but it isn’t necessarily the same score that your future lenders will use.
Here’s what you should know about the differences between your Credit Karma score vs. your actual score.
Which Credit Score Does Credit Karma Use?
Contrary to popular belief, every consumer has a lot more than one credit score. There are many different scoring companies, and they each have multiple versions of their proprietary credit scoring models.
To top it off, lenders can apply those models to any of your credit reports from the three major credit bureaus (Experian, Equifax, and Transunion), each of which has a slightly different credit file for you.
That creates the potential for countless versions of your credit score, but lenders focus almost exclusively on the ones that come from two primary companies: FICO and VantageScore.
Your FICO scores are your “real” scores, because 90% of lenders use FICO scores. You may sometimes hear people call VantageScore a “FAKO” score. (Pronounced “fake-o”)
The most popular versions of each are FICO Score 8 and VantageScore 3.0.
Credit Karma partners with VantageScore and gives users their VantageScore 3.0 for free. They pull your credit report from the Equifax and TransUnion credit bureaus. That way, you can see your score based on the credit history in both.
How Far Off Is Credit Karma?
VantageScore 3.0 is a commonly used score among free credit monitoring tools. FICO has been around a lot longer, and if you’re going to consider your actual credit score, it should be theirs.
FICO and VantageScore have different formulas for calculating your creditworthiness, which means Credit Karma’s score might be a little different from your actual score.
For example, your payment history refers to how consistently you pay each monthly payment on time and in full. The credit factor is worth 35% of your FICO Score 8, but 40% of your VantageScore 3.0.
The two models treat credit utilization, your total revolving debt balance divided by your total credit limit, slightly differently as well.
It’s worth 20% of your VantageScore 3.0, where it stands as its own factor. Meanwhile, it falls under the amounts owed factor in the FICO Score 8 model, which is worth 30% in total.
As you can see, there are differences between the two models, but they’re usually not too significant. You’ll generally be in the same credit score range under both.
For example, you’ll probably never have bad credit according to a lender who uses your FICO credit score while having a good credit score according to one who uses VantageScore.
If you’re just checking your score periodically for generic credit monitoring purposes, Credit Karma’s VantageScore 3.0 should be close enough to your FICO score to be satisfactory.
However, if you’re considering applying for a significant credit account like an auto loan or a mortgage, even a few points can make a difference in your interest rate. In those cases, it’s probably worth going elsewhere to get your FICO Score 8.
Limitations of the Credit Karma Credit Score
Monitoring your credit is a good practice, especially since it can notify you of any potential problems before they develop into something significant, like identity theft.
Checking your Credit Karma credit score is a great way to stay on top of the updates to your file, but it’s not perfect. Here are the most significant limitations to its service.
It Only Shows You Information From Two Credit Bureaus
Unfortunately, Credit Karma only provides your score using data from two of the three major credit bureaus: Equifax and TransUnion. If you’re planning to apply to a lender who uses Experian, you could be in for a surprise.
After all, shifting even one variable in a formula can make a significant difference. Likewise, even one change to your credit report can make a meaningful impact on your score.
While your credit reports are usually similar, there can be differences. In some cases, your credit scores can vary significantly from credit bureau to credit bureau.
It Uses Vantage 3.0
VantageScore 3.0 is probably going to be very similar to your FICO Score 8, but it’s never going to be exactly the same. The formulas are distinct enough to produce a different credit score even if they use the same report data.
That’s not a big deal if you’re just checking in on your credit periodically to monitor your progress.
However, if you’re going to be applying for a significant credit account or go interest rate shopping with a mortgage lender, you want to make sure you check the score that your lenders will use. Most often, that’s going to be a FICO score.
Note that it’s impossible to convert your VantageScore 3.0 into your FICO Score 8. If you want your FICO score, you’re going to have to get it directly. You won’t be able to back into it from your Credit Karma score.
Your Credit Scores Don’t Get Updated Immediately
Another downside of checking your credit score through a third-party website like Credit Karma is that your scores don’t update in real-time. They can only show you the impact of the changes you’ve made once they get word of them, which takes a while.
For example, say that you successfully pay off a credit card account that’s been holding your score down for months. You won’t see the improvement in your score through Credit Karma until all of the following events occur:
- Your credit card issuer reports the updated balance to the credit bureaus
- The bureaus update your report with the new credit information
- Credit Karma checks your credit report and sees that there’s been a change
As you can imagine, each stage of this process takes time. Lenders generally send an update to the credit bureau or bureaus of their choice every 30 to 45 days, and while the report should show that new information quickly, it might not be instantaneous.
Credit Karma claims that it checks your TransUnion credit report for updates daily, but it only does so with your Equifax report every seven days, at most.
As a result, if you happen to make a change to your credit profile at the wrong time with a lender who only reports to Equifax, it might take you upwards of 52 days to see the change reflected in your Credit Karma credit score.
How Credit Karma Works
When Credit Karma says they provide you a free credit report and credit score, don’t worry – they mean it. You’ll never have to open your wallet to pay for any of the services they offer on their site.
Other sites that let you check your score may lure you in with an initial free credit score, then try to upsell you on a premium account or a credit report. Credit Karma won’t, which is refreshing.
That said, they are a business, and they have to make money somehow. There are two primary ways that they do so.
First, Credit Karma receives a commission when users sign up for credit cards, installment loans, or other products through their site.
That’s why they push as hard as they do to get you to sign up for a credit card, personal loan, or insurance policy through them.
Credit Karma is pretty upfront about this fact, but the second way they make money is a bit more roundabout. They’re probably profiting off of your personal data somehow.
A lot of sites like these claim that they don’t sell your private information under any circumstances.
Credit Karma is one of them, but they’re now a subsidiary of Intuit, which lists thirteen distinct instances in which they’ll share your data with third parties on their privacy page.
Should I Use Credit Karma?
For a free resource, Credit Karma provides a lot of value. You can get access to your credit score, credit report, and their credit monitoring service without even giving them your credit card information.
If you just want to stay on top of your credit score as you try to improve it, then Credit Karma will probably suit you just fine. In fact, it doesn’t matter too much which score you use in that case.
You only need to track the changes in your score at that point. You don’t necessarily care about pinpointing your actual score.
However, if you’re going to be applying for a significant credit account anytime soon, like a car or home loan, it’s worth taking the time to get your actual FICO score through another source.
One of the best places to get your FICO score is through Experian. Not only do they give you your FICO Score 8 for free, but they’ll base the information on your Experian credit report (obviously).
If you want a more holistic picture of your credit score, you can combine Experian with Credit Karma. You’ll have a score from each credit reporting agency and both FICO and VantageScore.
It’s worth noting that using these services will never trigger a real credit check. That means checking your score through them won’t initiate a credit inquiry or hurt your score like it would if a financial institution pulled your info because you applied for an account.
Why Does Credit Karma Provide You With a Free Score?
Credit Karma can afford to provide you with a free VantageScore credit score because they profit off you in other ways. First, they make a commission anytime someone buys a credit card, loan, or insurance product off their site.
Second, they very likely make a profit off of all the private data they get from you. Credit Karma, as an extension of Intuit, may collect all of the following information on you:
- Identification information such as your name, social security number, and driver’s license number
- Share your credit scores and report data with lenders that may want to send you offers
- Record which credit cards or loans you apply to, and whether you get accepted or rejected
- Glean location-based information from when you use the app
That barely scratches the surface. Their privacy page includes a dozen other kinds of information they gather, plus a half dozen ways to get it that go beyond accepting the information you provide.
The rest of their page also goes into detail about the various situations in which they can share your personal information, including the catch-all: “with your consent.”
Note that simply checking yes on a random terms and conditions update could easily constitute giving consent.
All in all, Credit Karma is a great resource to get an educational score. Just make sure you’re well aware of the privacy implications when you sign up for their services.
Nick Gallo is a Certified Public Accountant and content marketer for the financial industry. He has been an auditor of international companies and a tax strategist for real estate investors. He now writes articles on personal and corporate finance, accounting and tax matters, and entrepreneurship.