Did you recently try to apply for a loan, only to be surprised when your credit score during the application process didn’t match the score you saw on Credit Karma?
This is a common dilemma. A borrower believes based on Credit Karma that their score is high enough to qualify for a loan at a certain rate, submits an application, and then gets denied.
CNBC reported in January, “On Tuesday afternoon, consumers took to Twitter to express their frustration over their credit scores on Credit Karma, the personal finance company owned by Intuit. The issue for most wasn’t that the credit scores they were finding on the Credit Karma website were low—rather they were too high.”
Why This is Happening
As a consumer, you have many credit scores. The most important one for mortgages and other loan application is your FICO score.
But when you check your credit score for free on Credit Karma, it isn’t your FICO score you see, but another type of score called your VantageScore.
Both types of credit scores are computed using similar factors, but with different weights applied to each.
Your FICO score consists of:
- Payment history: 35%
- Amounts owed: 30%
- Length of credit history: 15%
- New credit: 10%
- Credit mix: 10%
FICO credit ranges are:
- Exceptional: 800+
- Very good: 740 to 799
- Good: 670 to 739
- Fair: 580 to 669
- Poor: 579 and below
Your VantageScore consists of:
- Payment history: extremely influential
- Age and type of credit: highly influential
- Percentage of credit limit used: highly influential
- Total balances and debt: moderately influential
- Recent credit behavior and inquiries: less influential
- Available credit: less influential
The percentages for weighing each factor are not made public.
VantageScore ranges are:
- Excellent: 750 to 850
- Good: 700 to 749
- Fair: 640 to 699
- Needs work: 300 to 639
Check Your FICO Score Before You Apply for a Mortgage
Since your FICO score is the one that lenders are going to pull up, before you apply for a mortgage, you should know what it is.
Watching your VantageScore helps you get a broad idea of how you are doing credit-wise, but it cannot replace looking up your FICO score.
If you want to see your FICO score, you can buy it from Experian, Equifax, or TransUnion, or you can see if you can check it for free through your credit card provider, bank, or credit union. Another idea is Discover Credit Scorecard.
I Can Help You Understand Your Credit Scores
I know credit scores can be confusing, especially if you are a first-time homebuyer. But I am here to make them super simple!
To get answers to your questions about credit scores, please give me a call at (619) 857-7191. I would love to set up a consultation to clarify how credit scores work and to help you take the next steps toward qualifying for a competitive mortgage in San Diego.
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