If you’ve ever tracked your credit score before, then chances are you’ve used either Credit Karma or your annual credit report. Both have their advantages and disadvantages, but which is the better option for tracking credit scores? Keep reading to find out!
What is Credit Karma?
Credit Karma is a free credit tracking service that updates its information every 7 days. It uses VantageScore which is a newer model of measuring credit scores than the industry standard FICO. Credit Karma has many other services, in addition to free credit trackings, like personalized financial suggestions and offers that can all be browsed in one application.
What is an Annual Credit Report?
Each person with a credit history has a right to their annual credit report through the three major credit bureaus, Experian, Equifax, and TransUnion. Reports can be requested through annualcreditreport.com, which is authorized by the U.S. Federal government. An annual credit report uses the FICO scoring model, with information gathered from the three major agencies, has data that goes back up to ten years, depending on the specific events in the report. For example, most negative information stays on for 7 years, while bankruptcies stay on the report for 10 years.
What the Difference Between FICO and VantageScore?
FICO (Fair Isaac Corporation) and VantageScore are both models for measuring an individual’s creditworthiness. Neither collects information on their own. They both use information gathered from the three major credit reporting bureaus, TransUnion, Equifax, and Experian. And while your scores may be different between FICO and VantageScore, they should still be in the same category. For example, if your FICO score is “good,” then your VantageScore should still be in the “good” category as well.
The Main Differences:
- The three major credit bureaus created VantageScore as a way for those with less credit history (6 months or less) to view and track their credit scores. FICO does not start tracking scores until 6 months of credit activity has been established.
- When the credit score is requested, both FICO and VantageScore compile their scores at that moment. However, FICO uses only the current information available from the three major credit bureaus, while VantageScore uses information that spans the past two years.
- Lenders prefer to use FICO scores when determining approval. They will pull scores from Experian, Expedia, and TransUnion, and pick the middle score between the three to determine your creditworthiness.
Which Score Should You Be Tracking?
According to the experts, you can track either your FICO score, through your annual credit report, or your VantageScore, available through services like Credit Karma. Both scoring models, while the exact score may be different, should each put you in the same creditworthiness categories. Credit scores themselves, even within the FICO model itself, can be different, according to the specific bureau’s information. Different factors can also impact scores differently within each scoring model.
So, whichever model you choose to follow, you should just stick to that score so you can always keep your mentality about your credit score consistent. Baring in mind the different scoring models, and different scores within the models can add unnecessary confusion. As long as you are following your credit score consistently, and keeping an eye out for things like identity theft, you should be able to track your credit history effectively and accurately.
Which is Better?
The short answer? Neither! Both serve their own purposes and are accurate modes of tracking credit scores and activity.
The long answer? It’s really a matter of what your specific needs are. If you have less credit history and want to closely monitor your credit score as it builds, Credit Karma would be great for you. If you’re actively trying to improve your score, and want to monitor on a weekly basis, that would also be a great use for Credit Karma. If you know that your score is consistently “good” or “excellent” but you still want to keep tabs on your activity, your annual credit report, or FICO score through companies like American Express which offers it on-demand, may suffice on its own.
Our Final Thoughts:
Whichever service you decide to use, Credit Karma or your annual credit report, it’s just good to be monitoring your credit activity in the first place. Consistent monitoring can help you in detecting identity theft, seeing errors in your credit activity, and tracking your credit score. If you have any big purchases coming up, like a new home (!), it’s especially important to be closely monitoring your credit activity. The specific method that you choose is up to you! Just remember, consistency is key.
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About Gerardo Zavala, Realtor
There is a true passion for connecting people with real estate that makes me fall in love with my career over and over again. While my title says, REALTOR® I think I am much more than that. For example, I am present and actively listening to my client’s needs, on the spot when things are urgent, and by your side to say “congratulations.” Most of my clients will say that I am a connection away from support no matter the situation, day, or time. In my opinion, customer service, educating the client on progress and next steps, and overall satisfaction are my top priorities. How can I help you?
