Why Your Credit Score Might Be Wrong

The internet has some great credit score resources. You can get your credit score online for free. You can attend a meetup to talk about improving your score. And, you can even sign up for credit score dating websites (let us know how that goes). But can you get a free credit score that matches what your lender is using?

Probably not.

While sites like Credit Karma have become popular in recent years, they may not be giving you very helpful scores. Why? Because they aren’t providing FICO scores. We’ve talked a lot lately about new scoring models and changes to the industry, but for now FICO is still king. Let’s explain.

Your Credit Score on Credit Karma

Free credit score services like Credit Karma don’t typically give you a comprehensive analysis. These sites generally use a scoring model that is only based on one of the credit reporting agencies. Take a look:

Service Credit Reporting Agency Used
Credit Karma TransUnion
Credit Sesame Experian
Quizzle Experian

FICO provides a score for each of the credit reporting agencies. Its competitor, VantageScore uses one score that incorporates data from all three CRAs.

What about the lender?

Let’s imagine that you log into Credit Karma and see that your credit score is 760. Look at you! That is a fantastic score! According to our research, that would make you eligible for a 3.707% APR on a $200,000 30-year fixed mortgage.

The next day, you walk into the lender’s office, excited to get these great terms. You are shocked when the lender offers a 4.04% APR instead. This comes out to a difference of about $26 per month and totals over $9,000 in extra interest paid over the course of the mortgage. Why did this happen?

Your lender was using a FICO score, and according to his records your credit score was actually 740, not 760. While only a 20 point difference, this dropped you into a bracket with a higher interest rate. Check out the chart below that shows estimated mortgage terms by FICO credit scores:

FICO Score APR Monthly Payment Total Interest Paid
760–850 3.707% $921 $131,689
700–759 3.929% $947 $140,798
680–699 4.106% $967 $148,153
660–679 4.32% $992 $157,154
640–659 4.75% $1,043 $175,586
620–639 5.296% $1,110 $199,641


Sites like Credit Karma and Credit Sesame offer what some call FAKO scores. A nicer term might be “educational scores.” But are these totally useless? Not exactly. We’ve shown that these scores aren’t as accurate as FICO, but they can give you a good sense of where you stand financially. If you have a high score (above 700), then you are probably doing well financially and will have a pretty good FICO score too.

But don’t rely on these FAKO scores to tell you what kind of terms you will get on a mortgage or other loan. Expect FAKO scores to be inflated, or higher than your actual FICO score. Also, keep in mind that there are multiple FICO scores. You probably have a dozen or so even though you haven’t seen them. There is a FICO score for each CRA, and FICO offers different scores for different loan types (car loan, mortgage, etc.)

Your Credit Score Starts with Your Credit Report

You need to understand that the first order of business is checking your credit report. As you know, Clearpoint recommends that consumers use annualcreditreport.com when obtaining a free credit report. After all, it is one of the 3 Simple Financial Strategies You Aren’t Using .

Use this website to check your report, and then dispute any errors with the bureaus immediately. These reports aren’t as fun and exciting as your three digit credit score, but they are probably more important. Remember, your credit report determines your credit score and eventually determines the rates you will receive.

And one more thing, be careful if you decide to pay for your credit score. According to the FICO website, many consumers pay for scores that aren’t even close to their real scores and aren’t used by lenders. FICO recommends that you only pay for FICO scores. If you don’t want to pay, use the free scoring websites as a guide and talk to your lender about specifics.

One Change to Look for

We want consumers to know about changes that are coming to the credit card industry, such as the new rules about credit checks for employment. And there are certainly changes coming that will affect how you view your credit score.

The FTC and CFPB have noticed that free credit reports and scores are confusing consumers. Consumers are paying for information that should be provided for free (credit reports) or is inaccurate (credit scores). Expect to see tighter regulations around these websites in the near future. And, expect to see a free annual credit score sponsored by the FTC. If this comes to fruition, you will have access to your credit score and report every year, free of charge. And, these scores will more closely reflect what you actually get from a lender.

In the meantime, continue to check your credit report and learn how to pay off debt. Doing these things will bring a boost to your credit score and your financial health.

Have a credit score story for us? Let us know in the comments below. Thanks for reading!

Thomas Bright is a longstanding Clearpoint blogger and student loan repayment aficionado who hopes that his writing can simplify complex subjects. When he’s not writing, you’ll find him hiking, running or reading philosophy. You can follow him on Twitter.

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2 responses to “Why Your Credit Score Might Be Wrong”

  • John Mith

    I have to agree with this article and the concept of FAKO scores vs FICO scores. My credit card company provides me with an actual FICO score and the number is way different than I see on Credit Karma. I’m of the opinion that Credit Karma’s distorted picture they provide of your credit is to help promote the “offers” on their site. They don’t actually let you see the raw report just their interpretation of what’s on the report. The amusing part of many of these offers is they pretend to be helpful. “You could save X amount per year refinancing with X company”. If you look at the interest rate however it’s higher. Not really helpful or good advice.

    Moral of the story. Take free credit advice with a grain of salt. Also consider the motivations of the company providing that advice. They might be more interested in helping their paid advertisers make money than actually give consumers real advice that will save them money.

    • Thomas Bright

      Really good points, John! On the one hand, it’s great to get free information, but those advertisements and offers can certainly be misleading especially for those consumers who don’t analyze all the implications. Thanks for stopping by and commenting!