Many consumers are shocked to find out that their Credit Karma or other online scores do not match their true FICO score when it’s finally run by their mortgage lender.
This happens quite often – and it’s important to understand the differences and reach out to your mortgage professional first.
Unfortunately, many would-be buyers have an incorrect view of their actual credit worthiness and begin looking at homes too soon in the process.
To repeat, the key thing to remember here is to reach out to your mortgage professional to get your official FICO score.
I’d invite you to find out the particulars here – as the free online credit products and the FICO score used in mortgage qualification process are noticeably different. Essentially, they use different algorithms to come up with their own score.
Most lenders determine a borrower’s creditworthiness based on FICO® scores, a Credit Score developed by Fair Isaac Corporation (FICO™). This score tells the lender what type of credit risk you are and what your interest rate should be to reflect that risk.
FICO scores have different names at each of the three major United States credit reporting companies. And there are different versions of the FICO formula. Here are the specific versions of the FICO formula used by mortgage lenders:
- Equifax Beacon 5.0
- Experian/Fair Isaac Risk Model v2
- TransUnion FICO Risk Score 04
The Key Takeaway
The major takeaway is that your Credit Karma score will be different than your FICO score…and in most cases, the free, online score is better than the FICO score – at least that has been my experience.
Also, you can find out here how your credit score affects your mortgage rate – this is also worth the read!