Wednesday, June 7, 2023

Why Is My Fico Score Lower Than My Credit Score

What Is A Vantagescore

why is my experian score lower than credit karma

VantageScore was created by the three major credit reporting agenciesExperian, Equifax, and TransUnion. It uses similar scoring methods to FICO but yields slightly different results.

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One of the primary goals of VantageScore is to provide a model that is used the same way by all three credit bureaus. That would limit some of the disparity between your three major credit scores. In contrast, FICO models provide a slightly different calculation for each credit bureau, which can create more differences in your scores.

Does Everyone Have A Fico Score

Consumers who have a short credit history or few accounts on their credit reports might have a thin credit file. This is a term for consumers who dont have enough information on their credit reports to generate a credit score, including with the FICO model.

Over 60 million Americans have thin credit files, according to Experian. If youre among that group, you could end up with a poor credit score or unable to be scored by FICO. It can also make it difficult to get approved for new credit, whether its a credit card or home loan. And if you are approved, your thin credit file makes it more likely that youll get stuck with high interest rates that will make borrowing more expensive.

While it may seem like a Catch-22, to build a good credit score and history, you need to show that you can responsibly manage credit over a period of time. So, start small, as outlined above, and start building!

What Is A Credit Score

A credit score is a numerical representation of financial health, telling lenders at a glance how responsible you are with credit and debt. Generally speaking, a higher credit score suggests that you borrow and pay back what you owe on time. A lower credit score, on the other hand, may hint that you struggle with managing debt obligations.

So where do credit scores come from? They’re generated by companies like Equifax, Experian, and TransUnion based on information that’s included in your credit reports. A is a collection of information about your financial life, including:

  • Existing credit accounts
  • Public records, including judgments, liens, or bankruptcy filings
  • Inquiries about you from individuals or organizations that have requested a copy of your credit file

Credit reports are maintained by . Equifax, Experian, and TransUnion are the biggest in the U.S. These companies compile credit reports based on information that creditors report to them as well as information that’s available as part of the public record.

Recommended Reading: Best Way To Improve Your Credit Score

What Does My Credit Score Need To Be For A Mortgage

The minimum credit score required to get a mortgage varies by loan type:

Type of Loan
700-740 10-20%

1With a credit score between 500-579 you may still qualify for an FHA loan if you can put at least 10% down.

2No minimum credit score established by either the USDA or VA, but lenders are allowed to set their own requirements.

If youre a first-time home buyer, you may be surprised you could get approved for a mortgage loan with a credit score below 600.

But the score you see in a credit monitoring app, or in your credit card statement, wont necessarily be the score your lender sees when it pulls your credit.

The score your lender sees will likely be lower. So if your credit is borderline, youll want to understand how lenders evaluate your credit score and credit history before moving forward with a loan application.

How Do I Correct My Fico Score

Why Is My Fico Score Lower Than Credit Karma

However, there are steps you can take to fix your credit that we outline below.

  • Check Your Credit Score & Report. …
  • Fix or Dispute Any Errors. …
  • Always Pay Your Bills On Time. …
  • Keep Your Credit Utilization Ratio Below 30% …
  • Pay Down Other Debts. …
  • Keep Old Credit Cards Open. …
  • Don’t Take Out Credit Unless You Need It.
  • Read Also: Credit Score Needed For Chase Sapphire

    There Is Inaccurate Information On Your Credit Report

    Regularly checking your credit reports is one of the best ways to ensure no inaccurate information shows up in your file. Although it’s rare, mistakes happen, and it is possible that incorrect information on your credit reportsuch as inaccurate personal data or payment historyis causing your scores to drop.

    If something in your report is inaccurate, it could be a result of a lender accidentally reporting the wrong information. It could also be a sign that you have fallen victim to identity fraud. If you see something you believe is inaccurate, dispute the information with all three credit bureaus as soon as possible. But keep in mind, some pieces of data can’t be disputed, like credit inquiries, accurate birth dates and credit scores.

    Fico Scores: How They Work

    Lets take a look at the differences between these two credit score models, starting with your FICO score.

    FICO score calculations apply the following weights to financial factors:

    • Payment history: 35%

    Based on the calculations, your score could be:

    • Excellent: 750 to 850
    • Fair: 640 to 699
    • Needs work: 300 to 639

    Even though your VantageScore is important for some purposes, when you apply for a mortgage, it is ultimately irrelevant. Your FICO score will determine your loan eligibility, not your VantageScore.

    You Wont Know What to Expect Without Checking Your FICO Score

    By checking your VantageScore regularly on Credit Karma, you can make some basic observations. You can track improvements in your score and declines. You also should be able to tell whether your credit is generally healthy or otherwise.

    But will you have sufficient information to correctly guess your FICO score before you fill out a mortgage application? Unfortunately, no.

    Judging from borrower feedback, there is a significant chance your VantageScore is high in comparison to your FICO score.

    It is easy to overestimate how competitive your FICO score is as a result, and hard to gauge the impact of a lower score on your loan application.

    Here is what can happen if you fill out that application without checking what your FICO score is first:

    Looking up your FICO score in advance allows you to:

    How to check your FICO score

    First Residential Mortgage Can Answer Your Credit Score Questions

    Also Check: How To Get Credit Score To 800

    Why Did Your Score Change

    Your credit score gives lenders a sense of your debt-repayment history. Although different models are used to calculate your score, they all take the same financial behaviour into account. Your credit score is calculated based on your payment history, the amount of money you owe, the length of your credit history, the type of credit you have, and the new credit that has been added. A change in your score means one of those factors has changed.

    How Credit Karma Makes Money

    Why is My credit score so low?

    Credit Karmas business model is not entirely altruistic. It is a for-profit business that makes money by giving you a free credit score in exchange for learning more about your spending habits and charging companies to serve you .

    Your personal data is valuable stuff to advertisers, and they pay more to target it. With more than 100 million users, this is a healthy revenue model for Credit Karma.

    Read Also: Is Paypal Credit Reported To The Credit Bureaus

    Also Check: Td Bank Credit Card Minimum Credit Score

    What’s More Important Fico Or Transunion

    It’s considered to be one of the more balanced bureaus since it assigns weight fairly evenly across the standard risk categories. TransUnion ranges from a low of 300 to a high of 850. … FICO scoring is more holistic, which allows more Americans to qualify for loans and mortgages than most traditional bureaus’ scores.

    How To Make Sure You See An Accurate Credit Score

    If you just want to see how many recent inquiries you have or other data, any of the models can likely provide this. If the score number is what’s important to you, look for a site offering a FICO score. This will more closely mirror what a lender sees, since the vast majority of lenders in the U.S. still use FICO scores in credit decisions.

    Second, look at the date or “last updated” reference on the score in front of you. What’s happened between then and now? The more recent the score’s data, the more accurate it is. If multiple credit card billing statements, mortgage payments and other financial data have updated between then and now, the score won’t be worth much. Given that I have credit cards with numerous banks, I receive emails every few days telling me that my score updated. This comes from a statement closing or a payment notification appearing on my credit report.

    Third, consider getting your credit report from each of the three major credit bureaus . As the information on your reports directly impacts your credit score, it can be beneficial to check the reports and make sure everything is correct. By law, you are entitled to a full credit report from each bureau once a year for free. To get your full reports, head on over to the annual credit report site and click the Request your free credit reports button.

    Even better: Due to the COVID-19 pandemic, you can obtain these three reports for free once a week until further notice.

    Also Check: Chase Sapphire Card Credit Score

    Why Is Fico Score Lower Than Transunion

    This is mainly because of two reasons: For one, lenders may pull your credit from different credit bureaus, whether it is Experian, Equifax or TransUnion. Your score can then differ based on what bureau your credit report is pulled from since they don’t all receive the same information about your credit accounts.

    How Long Will A Credit Inquiry Stay On My Credit Report

    Learn About FICO Scores  CNBconnect

    Hard inquiries may stay on your credit report for two years, although they typically only affect your credit scores for one year. Having several hard inquiries within a short time may have a greater impact, except in certain cases . Even so, the effect of each hard pull diminishes with time.

    Checking your own credit report or using credit-monitoring services is considered a soft inquiry and has no effect on your credit score.

    Recommended Reading: Venmo Credit Card Credit Score

    Why Can I See My Fico Score But Others On My Account Can’t See Theirs

    You can see your FICO® Score because you are the primary account holder of an eligible account. Others may not be able to view their scores if:

    • They recently opened a new account
    • They’re an authorized user on someone else’s account
    • They have a billing statement in someone else’s name
    • They do not have an eligible account in Wells Fargo Online®

    I Don’t Agree With My Fico Score Or Score Ingredients What Should I Do

    If you feel information is inaccurate, your next step should be to review the details in your credit report. If there’s incorrect information within your Experian credit report, you may want to submit a dispute directly with the lender or company that provided the information to the credit-reporting company. Include any documentation you have, such as copies of a canceled check or payment verification email. For questions about Wells Fargo accounts, contact us anytime.

    If the creditor investigates and agrees there was an error, they’ll send an update to all the credit bureaus it reports to and have the late payment corrected or deleted. You can monitor your credit reports for the changes, which may take several billing cycles to appear.

    Accessing Your FICO® Score through Wells Fargo Online®

    Recommended Reading: Auto Interest Rates By Credit Score

    How Many Credit Scores Do You Have

    Many borrowers think they only have three credit scores one for each bureau . But even though the consumer information comes from the three main bureaus, different scoring algorithms are used to develop the score. Thats why there are hundreds if not thousands of credit scores. Some are industry-specific, like in the auto industry.

    Add to the confusion that scoring models are updated all the time. The moral of this story is if youre getting a mortgage dont think your Credit Karma score is accurate.

    You’ve Experienced A Major Event Such As Foreclosure Or Bankruptcy

    Why Are My Credit Scores SO Different? FICO vs Vantage | Stephen Liao @Credit

    The late payments that often lead up to a bankruptcy or foreclosure harm your credit scoresand the events themselves can make matters worse.

    Bankruptcy is a legal process initiated by borrowers looking to get relief from debt payments, and it’s the most harmful single event to a consumer’s credit. Foreclosure is when your mortgage lender takes possession of your house, often following four consecutive months of missed payments, and is second only to bankruptcy in terms of credit harm.

    In addition to damaging your credit score, either event can disqualify you from certain types of borrowing in the future. A mortgage lender may be unlikely to take you on as a borrower if you have a foreclosure in your past, for instance. A legitimate foreclosure mark on your credit report will stay there for seven years.

    The amount of time a bankruptcy stays on a credit report depends on the type of bankruptcy filed. Chapter 7 bankruptcy, for instance, appears on your report for 10 years from the date you filed, while Chapter 13 bankruptcy appears for seven years.

    Read Also: Is 680 Credit Score Good

    How A Credit Score Is Determined

    Your personal credit score is generated by a mathematical formula using information in your credit report. Credit scoring was first developed in 1958 by Fair Isaac Corporation to help predict whether a borrower will repay their loan on time. The resulting score is commonly called a FICO score, after Fair Isaac. Higher scores are better than lower scores.

    When a credit bureau calculates your score, they do not take race, religion, age, sex or marital status into account. Neither does your income, occupation or employment history figure into the score, nor if you’ve been turned down for credit.

    Fico Vs Experian Vs Equifax: An Overview

    Three major compile information about consumers’ borrowing habits and use that information to create detailed credit reports for lenders. Another organization, Fair Isaac Corporation , developed a proprietary algorithm that scores borrowers numerically from 300 to 850 on their creditworthiness. Some lenders make credit decisions strictly based on a borrower’s FICO score, while others examine the data contained in one or more of the borrower’s credit bureau reports.

    When seeking a loan, it is helpful for borrowers to know their FICO score, as well as what is on their credit bureaus reports, such as those from Experian, Equifax, and TransUnion. A borrower who appears stronger under a particular scoring or reporting model should seek out lenders that use that model. Given the crucial role a good credit score and credit reports play in securing a loan, one of the best credit monitoring services could be a worthy investment to ensure this information stays safe.

    Recommended Reading: Do Medical Collections Affect Credit Score

    Lenders Use A Different Credit Scoring Model

    For example, auto lenders typically use a credit score that better predicts the likelihood that you would default on an auto loan. Mortgage lenders, on the other hand, pull FICO scores from the three main credit bureaus Equifax, TransUnion, and Experian and use the mid score.

    Mortgage lenders use a tougher credit scoring model because they need to be extra sure borrowers can pay back large debts.

    Since mortgage companies loan money on the scale of $100,000 to $1 million, theyre naturally a little stricter when it comes to credit requirements.

    Mortgage lenders will use a tougher credit scoring model because they need to be extra sure borrowers can pay back those large debts. So theres a good chance your lenders scoring model will turn up a different sometimes lower score than the one you get from a free site.

    Why Is My Credit Score Different From My Fico Score

    Learn About FICO Scores  CNBconnect

    When the scores are significantly different across bureaus, it is likely the underlying data in the credit bureaus is different and thus driving that observed score difference. … So, make sure the credit scores you are comparing are actual FICO Scores. The FICO scores should be accessed at the same time.

    Recommended Reading: Is Your Fico Score The Same As Your Credit Score

    What Credit Score Is Needed To Buy A House In South Africa

    The minimum credit score for a home loan in South Africa is around 640. A score of 600+ will give you a fair chance of home loan approval – although this may vary according to which bank you use. A score of 670+ is considered an excellent credit score, significantly boosting your chances of home loan approval.

    Why Isnt My Score The Same Everywhere

    You may have a different score with each of the three nationwide credit reporting agencies . Dont be worried if thats the case. We all collect similar information, and a lot of it overlaps, but scores can vary for a number of reasons. For example, lenders can choose to report to one, two or all three agencies. Because of this, the information in your reports can vary, which is partly why your scores can differ too.

    There are also many scoring models, and they may weigh certain information in your reports more heavily than other factors. For example, one scoring model may put more emphasis on total credit usage than others. Because there are varied scoring models, youll likely have different scores from different providers. Lenders use many different types of credit scores to make lending decisions. The score you see when you check it may not be the same as the one used by your lender.

    Read Also: Does Opensky Report To Credit Bureaus

    Also Check: What Credit Score Do You Start At

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