Credit Karma Accuracy

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Credit Karma has made waves in the financial industry by offering both free credit scores and free credit monitoring to its customers. At first, a lot of people were worried that Credit Karma is a scam. But, after an in-depth Credit Karma review, it seems that the company is legit. However, it is important to understand just what it is that they offer.

Credit Karma vs FICO

Credit Karma Accuracy graphicTo understand whether Credit Karma scores are accurate, you first have to understand what credit scores are and where they come from.

First, a credit score is nothing more than a number calculated from information in a person’s credit report. The idea behind a credit score is to determine algorithmically how good of a credit risk someone is without actually have to read through the details of a lengthy credit report. The resulting number is only as good as the math that created it. The more statistically accurate the number is, the better the score is.

However, in the real world, there is really only one credit score that matters. Fair Issac was the first company to popularize the concept of a credit score. Over the years, it has demonstrated that its credit score algorithm is accurate enough statistically for financial investors to use it in determining risk. Since then, there have been other companies using other statistically models to generate their own credit scores. Most notably, the three major credit bureaus have all tried to push a credit score of their own, but without much success. When it comes to actual lending, the gold standard is the FICO score.

That leads to another type of mathematical attempt at creating a credit score. Since the only credit score anyone really cares about is their FICO score, that is the score that people want to know. Since that score is a proprietary product of the Fair Issac company, they are the only company than can calculate your actual FICO score.

However, the company was forced by Congress to provide a little bit of transparency into the process of calculating a score by providing some general information as to what a FICO is based on, and just as importantly, what it is not based on. Starting from there, numerous entities have tried to develop an algorithm for creating credit scores that generates a similar score to the official FICO score. Doing so requires reverse engineering the mathematics that go into the score. No one has exactly duplicated the score, but many alternate scores provide a close approximation.

Credit Karma does not provide a true FICO score. Doing so would be prohibitively expensive for a free offering, even with the revenue generated by advertising and referral fees.

How Accurate is Credit Karma Score

The Credit Karma score accuracy question comes down to how typical you are as a user of credit. If your credit profile is one with typical amount of debt, income, ratios, and payment history, your score will be pretty accurate. This type of credit profile has been reverse engineered more than any other and therefore the alternate algorithms are better at predicting this kind of score. If, on the other hand, your credit profile is unusual, your score may be significantly off.

For example, if you have a very short credit history, but very high income your score might not be very accurate. Likewise, people with a long, but atypical credit history might find their score way off.

Either way, the best use of any free online credit score is to track the MOVEMENT of your score over time. If your score is going up, then the chances are very good that your actual FICO score is doing the same. The reverse is also true. If you do something like open a new credit card, or cancel an old one, and your Credit Karma credit score goes down, you might want to consider reversing course.

Regardless, knowing your “real credit score” when you are not applying for credit is not very useful. Your score changes every day, so even if you get your official, 100% accurate, FICO score on Monday, but Friday, your score may be up or down several points, just like your credit score might be off by several points. In other words, don’t stress out about the exact number. Instead, focus on making the number go higher, or at least stay the same.

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6 Comments on Credit Karma Accuracy

  1. Kevin Cole says:

    Credit karma is way out of whack . I signed up a year ago with Lexington Law . They were supposed to improve my credit score and clean up negative items . After a year with them Credit Karma showed me of having a credit score of 710 … I was all excited . I went to my bank to apply for a small motorcycle loan of $4000. Low and behold I was SHOT down …. I only had a credit score of 590 . That’s 120 points .The hard inquiry dropped my credit score another 18 points . So instead of Credit Karma working for me , it was a detriment to my credit history . Don’t use them !!! Kevin Cole

  2. linda says:

    My credit score has not changed in 7 months. Its been the same and I have car payments that should help the score go up.

  3. Mark says:

    I have been using Credit Karma for a while and it fluctuated quite a bit. I was never too concerned because my average score is in the excellent range. Recently for no reason it took quite a dip down in to the low to mid “fair” range. Out of fear I may have been a victim of fraud, I immediately paid for the true 3 company score. They were all actually higher than Credit Karma had showed them to be for quite some time. I went thru all activity and found no disputes. I have been monitoring my scores since this happened and Credit Karma is still significantly off (100 points).

  4. timothy cort says:

    i signed up with credit karma back in November of 2014 my scores
    were in the 600’s then went down to 590’s then went back up
    since then i have opened up 2 credit card accounts capital one
    platinum cli 300 starting out, in may American express cl 1000
    my scores are 754 and 740, but was denied discover it credit card
    in may (was pre qualified too, was not to happy because they require excellent credit, and i have not got a rejection letter yet no good no the reconsider number, so i will stop for a couple of months and then retry maybe. so i think credit karma is pretty good for free monitoring

  5. Terri says:

    I had been watching my credit reports after my divorce, so I knew I had a high 700s FICO. Then I hit a hard patch and had to use my credit cards, cosigned for my daughter’s leased vehicle (which got me 3 credit pulls from the dealer!), and suddenly I had dropped over 100 points according to Credit Karma. I am trying to get that score back up since my use of credit is quite responsible, but the score seemed stuck in the Poor-Fair range. Desperate, I got an account with Identity Guard and, to my surprise, their 3 bureau agency reporting has my score in the low 700s. Credit Karma still lists it in the low 600s. I haven’t applied for any new credit, so not sure if I’m good or poor…but I continue to monitor and hope Identity Guard is correct!

  6. Darren Hankins says:

    CreditKarma is not very accurate and is very slow to show changes to you credit report and score.IF you need real time score with the same data that banks and financial institutes use their is only one four place. 1. MyfICO they are the one they that have the algorithm that the three credit agency use to CALCULATE SCORES.
    2.Equifax, 3. Transunion 4.Experian. Do not depend on CreditKarma for true up to date credit information.

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