Twitter was abuzz today with questions about Credit Karma, the Intuit-owned personal finance company that provides people with free copies of their credit scores. It’s unclear what exactly prompted the discussions, but some users had noted how Credit Karma scores can be, shall we say, more generous than other scores out there.
The short answer for why different entities produce different scores about your credit is because they’re calculated using information from three distinct credit bureaus—Equifax, Experian, and TransUnion—and that information can vary. For instance, a lender may report negative or even erroneous information about you to only one of the bureaus, meaning scores that factor in that bureau would be negatively impacted.
Moreover, different scores are generated using different scoring models. Credit Karma scores use models from VantageScore, which is not as widely used as the market dominant FICO. This is not to say that the score you receive from Credit Karma is inaccurate, but it might very well be different from the score a lender would actually use to assess your creditworthiness. As CNBC reported, it’s not uncommon for consumers to receive a higher score from a service that provides free scores only to be shocked to learn that their FICO score is lower than they expected.