FICO vs Credit Karma: What you need to know

Credit Karma scores and FICO credit scores are two names that you must have heard but might not know exactly what they are or how they differ from one another.

To start, they are two completely different companies. Credit Karma is an independent website that gives free access to the Vantage 3.0 credit score. On the other hand, FICO, which stands for Fair Isaac Corporation, is a credit scoring company that gives eponymous scores from the largest competitors to Vantage, such as Transunion and Equifax.

Credit Karma Model

The Credit Karma model starts with the fundamental belief that you have a right to know and view your credit score, wherever and whenever you want.

Therefore, if you know your score, you will better understand your financial picture and as a result, you will not be surprised by the loan terms you are offered. It is a win-win solution for all.

With the Credit Karma model, you will be able to pay your bills and avoid a lot of time wasted shopping around for car loans or mortgages trying to find the best terms offered for your credit score.

Credit Karma works in a simple fashion, making its money in two different ways.

Along with the credit score, they will place advertisements on a given page and hope that you respond well to those advertisements.

The whole purpose and way through which Credit Karma works is that it helps you save money. By giving you a simple and free score in exchange for learning about you, they then charge advertisers to put ads in front of you.

FICO Scores

The Fair Isaac Corporation created and manages FICO scores. They are used to help consumers make billions of credit related decisions each year.

This company calculates your FICO score from your debt and loan information with the help of consumer credit reports. They can vary drastically based on several factors that are weighted against one another to give you your most accurate credit score, and the one that most banks will use to determine your loan terms.

The FICO mortgage score is ranked between 300 and 850. The higher the scores, the lower the credit risk will be and the better terms you will be offered.

For Comparison

There are many differences between Credit Karma Scores and FICO Credit Scores. The biggest advantage of Credit Karma over FICO is that it is free. It is also true that anyone who gets a free credit score from the Credit Karma is that the score is not as accurate as the FICO score, but that does not necessarily mean that the score is unreliable. Use it as a guide until you absolutely need to check your FICO score.

Another difference is that Credit Karma does not require you to pay upfront fees nor is there sensitive information involved. The FICO score is different. Being the official score most banks will use to determine the terms of your repayment plan, the FICO is generally not free and requires the disclosure of sensitive information like your Social Security Number. For this reason, make sure you use reputable websites when checking your FICO score.