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How Credit Karma Calculates Your Vantage Score

Credit Karma helps you monitor your credit score without any expense to you.  This is a great tool to have to keep track of where you stand with your Vantage score.

Credit Karma

With Credit Karma, you get access to your credit scores and reports from TransUnion and Equifax, along with weekly updates.

Credit Karma will make recommendations, trying to help you save money and improve your score. If you happen to get one of the products recommended, the bank or lender pays Credit Karma, which is how they can keep their service for free their 60 million consumers.

Hows is the Score Calculated?

Credit Karma uses VantageScore rather than a FICO score.  FICO score is a mathematical summary of an individual’s creditworthiness which is calculated by the information on a person’s credit report.  The VantageScore model was developed by the three major credit bureaus – Equifax, Experian, and TransUnion – for consumers to have a “more predictive scoring model that is easy to understand and apply.” Both models are created to calculate a person’s ability to repay a debt, but they do not examine the credit data equally.

VantageScore vs. FICO

There are six main categories that contribute to a VantageScore:

  • Payment history: extremely influential
  • Age and type of credit: highly influential
  • Percentage of credit limit used: highly influential
  • Total balances and debt: moderately influential
  • Recent credit behavior and inquiries: less influential
  • Available credit: less influential

If a consumer is new to credit, a VantageScore may be calculated with just one month’s history of credit and one account reported to a credit bureau within the past 24 months. VantageScore collaborates data that reflect patterns of behavior over time.

A FICO score has five main categories:

  • Payment history: 35%
  • Amounts owed: 30%
  • Length of credit history: 15%
  • New credit: 10%
  • Credit mix: 10%

A FICO score can be calculated when the consumer has one or more accounts that have been open for at least six months and that one of these accounts has reported to the credit bureaus within the past six months. FICO credit-scoring models use borrowing and credit data of consumers that have been reported to credit bureaus at the time the scores are generated.

VantageScore and Credit Karma

The VantageScore from TransUnion and Equifax is populated for consumers on Credit Karma.  This score is better for members without a lot of credit history, therefore, fewer “thin files.”  With fewer “thin files” more people can get a credit score since they are building credit health or simply are new to credit.  Paid collections accounts don’t factor into the VantageScore, even if they are on your credit report.

Why is a Credit Score Important?

Credit scores are a crucial factor when it comes to borrowing money, so it is in your best interest to monitor your credit score. These scores convey a snapshot of an individual’s credit profile at a specific point in time when the scores are generated. If you use credit responsibly, pay your bills on time, reduce your debt, and apply only for the credit you need, with time you can build a substantial credit history.

Original Article Found Here.