Understanding Different Credit Scoring Systems: Why Your CreditKarma Vantage Score Rarely Matches Your Mortgage Application Score

Navigating the world of credit scores can be confusing, especially when the scores you see online don't match up with what lenders see when you apply for a mortgage. If you've ever checked your credit score on CreditKarma, you've probably noticed it's often different from the score your lender pulls. The key to understanding these discrepancies lies in the different credit scoring systems used for various types of loans.

The VantageScore vs. FICO Score

Firstly, it's essential to know that there are multiple credit scoring models, with VantageScore and FICO being the most commonly used. CreditKarma provides your VantageScore, a model developed by the three major credit bureaus: Equifax, Experian, and TransUnion. This model is widely used for educational purposes and gives consumers an idea of their credit health.

However, most lenders, including mortgage lenders, rely on the FICO score. Developed by the Fair Isaac Corporation, the FICO score is considered more predictive of credit risk, which is why it's the preferred choice for lending decisions. There are several versions of the FICO score, but mortgage lenders typically use older versions like FICO Score 2, 4, or 5, which can lead to variations between what you see on CreditKarma and what lenders see.

Different Scoring Models for Different Loans

Credit scores aren't one-size-fits-all. Various types of loans use different versions of credit scores tailored to predict risk for that specific type of credit. Here's a breakdown:

• Credit Cards: Credit card issuers might use FICO Bankcard Scores, which place more emphasis on your revolving credit, such as credit card balances and payment history. These scores often range between 250 and 900.
• Auto Loans: Auto lenders often use FICO Auto Scores, which factor in your history with auto loans more heavily. This score ranges from 250 to 900 and helps lenders predict the likelihood of defaulting on an auto loan.
• Mortgages: Mortgage lenders, as mentioned earlier, rely on older versions of the FICO score. They use a combination of FICO Score 2 (Experian), FICO Score 4 (TransUnion), and FICO Score 5 (Equifax). These scores range from 300 to 850 and provide a comprehensive view of your creditworthiness based on a long-term credit history.

Why the Discrepancy?

Several factors contribute to why your CreditKarma VantageScore and your mortgage FICO score can differ:

1. Different Models and Algorithms: VantageScore and FICO use different criteria and algorithms to calculate your score. For instance, VantageScore might put more weight on your recent credit behavior, while FICO considers a broader history.
2. Data Differences: Sometimes, the credit reports pulled by different scoring models might have slight variations in the data due to timing differences in reporting by creditors.
3. Version Variations: As mentioned, mortgage lenders often use older versions of the FICO score, while CreditKarma provides the most recent VantageScore model. These versions can interpret your credit data differently.
4. Weighting Factors: Each scoring model weighs factors like payment history, credit utilization, length of credit history, types of credit, and recent credit inquiries differently.

Why It Matters

Understanding these differences is crucial, especially when you're planning to apply for a mortgage. Knowing that your mortgage lender will likely see a different score than what you see on CreditKarma can help you better prepare for the application process. It's also a reminder to maintain good credit habits across the board, as these will generally positively impact all your scores, regardless of the model.

Conclusion

In the end, while tools like CreditKarma are excellent for monitoring your credit and understanding your overall financial health, it's essential to know that the score you see there might not be the same as what a mortgage lender will see. If you're planning to apply for a mortgage, consider getting a copy of your FICO scores directly from the credit bureaus to get a more accurate picture of where you stand.

At Gold Standard Mortgage, we're here to guide you through every step of your home loan journey. If you have questions about your credit score or need assistance preparing for your mortgage application, don't hesitate to reach out. Remember, we're not just here to help you buy a house; we're here to help you build your financial future.

Feel free to reach out if you have any questions or need further assistance in your home loan process. Follow us on Instagram @homeloansurgeon for more tips and updates!

Brandon Goldberg

NMLS 859086

Gold Standard Mortgage