Why are credit score applications different from attracting a lender?

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Have you ever heard a consumer say, “I had much higher credit scores on Credit Karma than what you’re getting right now, (insert lender’s name here). Why is that? Did you just lower my score? Why are mortgage scores so low? »

This is a very common conversation between lenders and their customers across the country. Tune in as Rick Guerrero sits down with Micah Curtis, Regional Manager of Home Loans Assist, to explain why consumers might see so much of a gap in Credit Karma scores to a lender’s lure. Here are some of the main takeaways:

  • There are different FICO algorithms used to calculate consumer scores.
  • Websites like Credit Karma do not use a FICO scoring model. Instead, they use a VantageScore model.
  • On average, these scores will be 40-60 points higher than what a loan originator or banker will see because, as Curtis mentioned, “the algorithms used in the mortgage industry are completely different.”
  • Factors such as late payments or collections are weighted differently in the mortgage industry compared to a consumer credit website like Credit Karma.
  • It is almost important to note that websites like Credit Karma do not attempt to provide consumer loans or assess risk. Plus, Credit Karma offers a snapshot of your credit score based on just two years of spending behavior.

Rick Guerrero is the Director of Branch Sales and Strategic Partnerships at US Mortgage Corp. You can follow him on Facebook or connect with him on LinkedIn.

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