FICO score

Credit Karma Won’t Be Giving FICO Scores Anytime Soon

July 1, 2014 By Jeffrey Strain 4 Comments

Credit Karma isn't likely to give a FICO score.

Now that some credit card companies are giving FICO scores to customers with their monthly statements, some people wonder why the free credit score companies don’t simply begin providing users with their FICO score as well? Many of these free credit score companies like Credit Karma, Credit Sesame, and Quizzle give their users a FAKO score (also called an “educational score” by the industry) rather than their FICO score. A FAKO score is one that uses a similar scoring system as is used with FICO, but it’s not a score from MyFico. There are arguments as to whether a FICO score is better than a FAKO score, but most people would probably prefer to have a FICO score over a FAKO score if given the choice.

There are a number of good reasons the free credit score companies decide to do choose FAKO over FICO. They include the following:

Cost: The cost of a FICO score is more than a FAKO score, and switching would make their revenue model more difficult to work.
Purpose: The main purpose for the score isn’t the same for both. Credit Karma and sites like it use the score for educational purposes to teach users how doing different things will affect their credit score, while the FICO score is used by lenders to evaluate the risk in giving a person a loan.
Adequate: While not the same, it adequately gives the information users want, and there’s debate as to whether or not it’s any less beneficial than a FICO score.
New: It’s only recently happened that FICO scores have become available at no-cost with the introduction of credit card companies giving them away with the user’s monthly statement.
Demand: At the moment, there doesn’t seem to be a great demand by users for a switch to be made.

With the free credit score companies having chosen to use FAKO scores, the question becomes, will these free credit score companies ever give their users their FICO score, and what would have to occur in order for that to happen?

Is It Feasible?

The first question to ask is whether or not it’s even feasible for the free credit score companies to offer a FICO score, and still survive. The fact that no Credit Karma clone is offering it, which would instantly differentiate themselves in the market, might very well mean that it’s not possible with the way their revenue model is set up. If it’s ultimately possible, it would mean much smaller profit margins than they are currently able to get.

Compelling Reason

In order for these sites to make the switch, they would need a compelling reason to do so. One might be users deciding a FICO score is better, and choosing to use websites that offer it over those that don’t. That’s not currently the case, but it could happen if users become more educated about the scores and begin to demand one over another.

It Becomes a Liability

Again, this is currently not the case and it doesn’t appear it will be in the future. If, however, a FAKO score becomes viewed as inferior, it could end up being a liability, which makes it difficult for the companies to maintain their customer base and continue to grow. If this happens, they would be much more likely to consider the switch.

Will It Happen?

Within the current climate, it seems to be a long-shot that any of the no-cost credit score companies will switch over to begin providing a FICO score. There simply isn’t the compelling reason for them to do so at this time, and it doesn’t appear there will be any reason for the foreseeable future. That being said, it’s a dynamic industry with each of the competing companies trying to differentiate themselves from the rest. As competition continues to increase from credit card companies and banks, there may come a time when the switch makes sense. Until then, if you want a free FICO score, you’ll have to get it through a credit card company, rather than from sites like Credit Karma.

(Photo courtesy of Sean MacEntee)

Credit Karma Rivals: 5 Credit Cards Offering Free Credit Scores

June 16, 2014 By Jeffrey Strain 2 Comments

Credit Karma rivals: credit cards offering no cost FICO credit scores

It used to be those playing in the free credit score arena knew each other well. Credit Karma was the king, with others like Credit Sesame and Quizzle trying to dethrone it. While they were all battling each other, a new set of competitors tip-toed through the back door, and they look poised to completely change the free credit score landscape. The new competitors are credit card companies which are giving no-cost credit scores as part of their monthly statements to card holders.

These new rivals have the potential to completely disrupt the industry, because they already have a customer base which doesn’t need to be built from scratch. They also provide the credit score directly to their users, whereas the users must come to the traditional free credit score sites like Credit Karma. This shift occurred at the behest of the US Consumer Financial Protection Bureau, which began to urge major credit card issuers to provide free credit scores, along with related credit score information, to their customers. The bureau felt providing this information would help alert customers to possible identity theft taking place, along with giving them a better understanding where their finances stood. Slowly, but surely, credit cards have begun to offer this service to their users. Below you’ll find five credit cards which will provide you a free credit score simply for using their card:

Discover

Discover now provides your credit score each month along with your monthly credit card statement for free. The score is your FICO 08 Bankcard Enhanced version, based on the TransUnion report, which is the one which would be used by credit card companies.

Capital One

Capital One put together something more like Credit Karma than Discover for their card users. They created a destination area on their website called “Credit Tracker” where users can access their credit score, credit report summary/history, and free credit monitoring at no cost. The score they give is a FAKO score, not a true FICO score which is what all the free credit reports sites do.

First Bankcard

The First Bankcard offers the FICO 08 Bankcard Score (the one used by credit card companies) at no cost which can be accessed online 24/7. They also have information for users about what factors affect credit scores and steps which can be taken to strengthen the user’s financial health.

Barclaycard

The Barclaycard also offers a free FICO 08 Bankcard Score through TransUnion. In addition, it provides some factors affecting your score and historical tracking of your score.

Walmart Credit Card

Those with a Walmart credit card also have free access to their FICO Score through TransUnion each month. In addition, there is information to understand issues helping and hurting your score, free educational tools for establishing and keeping good credit, and up to 12 months of credit score history.

This is likely just the tip of the iceberg. Over time, chances are more and more credit cards will include their users’ credit score at no cost as an added bonus for using the credit card. Currently it’s an added perk which helps some credit cards differentiate themselves from others, but it certainly could become common to see with the majority of cards in the future, which will give the free credit score websites like Credit Karma a run for their money.

(Photo courtesy of Dino Husejnovic)

Credit Karma vs Discover FICO Score Review: Which is Better?

May 19, 2014 By Jeffrey Strain 3 Comments

Which is better Credit Karma or Discover FICO credit score

Now that Discover cards are offering free credit scores to all their card holders as part of their monthly statement, more people are wondering whether the score from Credit Karma or Discover is better? This isn’t an easy question to answer because there are differences that come with both services. Which company offers a better credit score depends a lot on what you want to do with your score.

If you already have a Discover credit card, there’s nothing that you have to do to get your score. It automatically comes as part of your statement each month. This now applies to all Discover credit cards. If you don’t have one of their cards, you need to decide whether signing up for another credit card is worth getting a free credit score on a monthly basis. For Credit Karma you must sign up on their website. The question becomes whether or not you’re willing to give sensitive financial information to a third-party website on the Internet. Both companies will require similar information upon sign-up.

Security

It really is a toss up as to which of the two is more secure. Each time you use your credit card, there is a chance that your information might be stolen. The whole Target data breach is a good example.

Credit Karma would seem to be more secure since you aren’t using it in multiple places like you do a credit card, but it’s had some security issues of its own. It recently had to settle with the Federal Trade Commission (FTC) due to lax security on its mobile app. The security issue had the potential to reveal all kinds of sensitive financial information, including social security numbers.

Which is More Accurate?

Credit Karma gives a FAKO score which is a derivative number, and not a true FICO score. Discover gives you your FICO 08 Bankcard Enhanced version based on the TransUnion report. This report is close to what a creditor would pull for a credit card application, so Discover should be closer to that type of credit pull. The problem is that there are close to 50 different types of FICO scores that are weighted slightly differently depending on who is asking for them. For example, there’s versions such as a auto enhanced FICO score and a mortgage enhanced FICO score. So while the Discover score should be close to the credit card score, it might be off to some degree to the other weighted scores.

Credit Karma has a similar problem, but it’s not clear if it’s close to any of the different true FICO scores, since it is isn’t drawn directly from them. It would seem that that Discover card score would be more accurate (and if I was going to make a guess which would be closer to what a lender was pulling, I would go with Discover), but there could be instances when the Credit Karma score was closer depending on which FICO score the creditor was pulling.

Tools

Credit Karma comes with a lot more tools that you can use to lay out a plan to improve your credit score and finances. With Discover, you get your score each month and that’s about it. Credit Karma provides tools that can help you figure out ways to reduce debt and get your finances in better order so that you can raise your score.

If you are following your credit score and trying to actively improve it, Credit Karma offers some tools and safeguards such as credit monitoring, that Discover doesn’t. If, on the other hand, you are more passively keeping an eye on your credit score and simply want to confirm that nothing out of the ordinary has happened to your score each month, Discover offers a good option.

Credit Karma vs FICO Score

May 12, 2014 By Jeffrey Strain 21 Comments

One of the negative points thrown at websites like Credit Karma is that the free credit score they give is not your FICO score. Credit Karma offers three different types of credit scores, all supplied by the credit reporting agency TransUnion. They offer the TransRisk New Account Score, VantageScore, and Auto Insurance Score. What these all have in common is that they are not FICO scores, but blended scores that are often referred to as FAKO or educational scores. The question that many consumers have is whether or not it’s important that the score you get from Credit Karma isn’t your true FICO score?

Why People Don’t Don’t Like The FAKO Score

Some people who have a problem with FAKO scores point to a number of reasons why they feel a FAKO score is inferior to your FICO score. One of the reasons is when a lender pulls your credit score, they are going to be looking at your FICO score, not one of the scores that you get from Credit Karma. On the surface, this makes sense, but the reality is that there probably isn’t a whole lot of difference. That’s because you don’t have a single FICO score. Different lenders will be pulling scores that are weighted to take into account the risk factors that matter most to them. For example, the score the car dealership gets for you from FICO will be different than the home loan officer. In other words, the score they get will most likely not be the same number that you receive from FICO.

Another complaint that’s often made is that a FAKO score isn’t as reliable as a FICO score, and this may mislead those who are getting them. It’s certainly true that anyone who gets a free credit score from Credit Karma needs to realize that the score is not their true FICO score, but that doesn’t necessarily mean that the score is unreliable.

What Do You Need Your Score For?

A lot depends on how the consumer is actually going to use the credit score. There’s an implied assumption that those who are seeking out their credit score are only doing it because they soon plan to take out a loan. This certainly could be the reason that they want to know their credit score, but there are also a lot of other legitimate reasons that people are interested in what their credit score is. It’s how the consumer wants to use the credit score that determines which of the two is a better choice.

When Using Credit Karma Is A Good Idea

If you aren’t going to be getting a loan right away, getting a free credit score from Credit Karma has the huge advantage in that you can track how your score changes over time. This can give you a better understanding of what affects your score and how it can change, depending on how you handle your finances. By being able to see your score on a monthly basis, it gives you a wonderful opportunity to improve your score. You can also get free credit monitoring so if something is put into your credit report that doesn’t belong there, you can catch it right away, so that your score remains high, rather than get a huge surprise if you are planning to take out a loan.

Another huge advantage that Credit Karma has over getting your FICO score is that it’s free. If you want to find out your FICO score from MyFICO, it’ll cost you $14.95 (although you should be able to find online discount codes which will allow you to get it for less than this). So if your main purpose for wanting a credit score is to see where it is and try to improve it for the future, Credit Karma (or other sites that give free FAKO credit scores like Credit Sesame or Quizzle) should fit the bill perfectly and make for a better option than your FICO score.

When You Need To Get Your FICO Score

If, on the other hand, you need an accurate score because you will be applying for a loan, I would probably opt for your MyFico score. As mentioned above, it’s probably not going to be exactly the same as the lender will get, but it’s the basis of that number so it shouldn’t be too far off of it. With Credit Karma (or any or the other sites), you simply don’t know how far off it will be, and in some cases a 10+ point swing can mean a different interest rate.

It’s also important to note that there is a risk to using third-party services for your credit score like Credit Karma. They recently were forced to settle with the Federal Trade Commission (FTC) do to lax security on their mobile phone app which left their customer’s sensitive financial information vulnerable to hackers. There is always an added risk of having sensitive financial information stolen when you give it to third-party sites like Credit Karma.

There is also a third option. A number of credit cards like Discover have started to give customers their FICO credit score on their monthly statements. If you aren’t credit card adverse and you have the discipline to always pay off your credit card balance each month, this can be a great alternative to the two.

For how to raise your credit score, or other ways to check your credit score check out these articles.

How to Raise Your Credit Score By 200 Points
Credit Cards That Give You Your Credit Score for Free
Forget Credit Scores: Now Almost Anyone Can Finance a Car

(Photo courtesy of Sean MacEntee)

Will Discover Make Credit Karma Obsolete?

April 7, 2014 By Jeffrey Strain 4 Comments

credit karma vs discover free credit score

There is once again a change taking place in the world of free credit scores. When Credit Karma first appeared, it was the one bringing a change in this same business. Their entry altered the way many people obtained their credit scores. The company came on the scene to offer free credit scores with no credit card needed, uprooting the leading free credit score companies at the time, which required a credit card as part of a free initial trial to a credit monitoring service. The way that they made their money was to charge the credit card if the customer did not cancel the trial before the free period ended. The new “no credit card” needed model was a hit, and made Credit Karma the leading free credit score website on the Internet. It even managed to produce copycats such as Credit Sesame and Quizzle.

It appears that another major shake-up is occurring within the free credit score universe, but this time it might be Credit Karma that finds itself being made obsolete. Credit cards, most notably Discover credit cards (the Barclaycard US and First Bankcard also give this service), have started to give their customers their credit score for free as part of their monthly billing statement.

The move is a huge disruption to the Credit Karma business model, and it only seems that it will get worse. Discover began giving out the credit score at no costs to the users of its Discover It credit cards in November of 2013, but the trial was such a success that they have decided to expand the service to all of its credit cards.

This could be just the tip of the iceberg. According to an article in Bloomberg, FICO is in the midst of “…negotiating with some of the largest credit-card issuers” about including credit scores with their statements. If it comes about that anyone who has a credit card is automatically getting their credit score for free as part of their statement, what need is there for consumers to seek out Credit Karma and other business models like it?

Another issue is what if banks begin giving out credit scores as part of having an account? While this hasn’t happened yet, there is a push from some consumer advocates for financial institutions to offer this service so that consumers have a better understanding of their credit score and how these scores work.

The question becomes, if more credit cards join Discover, or if banks begin to offer credit scores as part of opening an account, can a service like Credit Karma survive? Or will it become obsolete in the same way they made companies that offered credit scores, but required a credit card to do so, obsolete? If this becomes a trend, it will cause a number of issues that Credit Karma must overcome to remain relevant.

The Good News

Credit Karma has some friends to help them out as they try to find a way to stay relevant as it becomes easier for consumers to get their credit score as part of their normal banking. They were recently able to raise $85 million in new financing from Google Capital, Tiger Global Management and existing investors. These investors have confidence that the company can overcome the added competition heading toward them, or they wouldn’t have been willing to invest so much into the company.

Credit card statements only come out once a month, and Credit Karma offers their free score once a week. For those who want to see their score on a more regular basis, there is still a reason for the to seek then out.

The Challenging News

Credit Karma recently had to settle with the Federal Trade Commission (FTC) for failure to secure their mobile app. Not doing so made the app vulnerable and possible for hackers to obtain birth dates, credit card details, credit report details (including account names and balances), credit scores, customer names, email addresses, home addresses, passwords, phone numbers, and Social Security numbers. One of the main reasons security experts warn not to give sensitive financial information to third-party websites is that breaches like this can occur, and the above settlement should make anyone giving sensitive information to Credit Karma more than a little nervous.

Customers to this point have been willing to seek out Credit Karma if they wanted to find out their credit score because there really wasn’t an easier way to get it at no cost. This is no longer the case with credit card companies offering the score as part of the customer’s monthly statement. How will they compete against offers that are more convenient to obtain than their own service?

The ground is definitely beginning to shake in the world of free credit scores, and it should be interesting to see who will survive as a new phase of being able to obtain these scores becomes easier and easier, and from a wider variety of financial institutions.

(Photo courtesy of Karen Highland)

Is Quizzle Free Credit Score a Scam or Legit?

March 25, 2014 By Lori Kelley 7 Comments

Many people have come to realize that your credit score can be quite important to save money when you are trying to get certain types of loans. A good credit score can mean paying thousands of dollars less in interest than a poor score. For this reason, many people want to keep an eye on their score when they are about to take out a home mortgage or get a car loan. Some people feel it’s important to keep an eye on the score to make sure that nothing unusual is taking place in their credit reports. Whatever the reason, more and more people are looking for ways to obtain free credit scores.

If you want to get your score directly from FICO, it’s going to cost you about $20. Seeing this as an opportunity, a number of websites have begun to offer free credit scores. These include the likes of Credit Karma and Credit Sesame. Another player in this field is Quizzle.

Since Quizzle is not as well-known as Credit Karma and Credit Sesame, the question often arises as to whether or not Quizzle is a scam? People also wonder if it’s a safe and secure website to use? In other words, is Quizzle a scam or a legit website where you can obtain a free credit score? The best way to determine this is to understand how their system works, and exactly what you’re getting when you enter your information into their website.

Quizzle works in basically the same way as both Credit Karma and Credit Sesame, but it uses a different credit reporting agency to generate its score. While Credit Karma uses Transunion data, and Credit Sesame uses Experian data, Quizzle uses data from the third of the main credit reporting agencies; Equifax. Since all three of these sites use data from the different credit reporting agencies, the score that they generate from their data will all be slightly different from one another.

An important factor to note is that Quizzle doesn’t force you to use a credit card as part of the sign-up process in order for you to obtain your free score. Instead of making their money by having you sign-up for credit monitoring services as part of the sign-up process, they are able to generate income by serving you advertisements and through lead generation. For example, while using their website you may get offers to sign up with a new credit card that has a lower interest rate than your current credit card. They may also provide offers to refinance your home at a better rate than you’re currently paying on your mortgage. If you happen to sign up with one of these offers, Quizzle will earn some money because they referred you to the business. This means that Quizzle is using a legitimate business model, and it’s not a scam. Although it is legit, it’s essential that you understand how the business works so that you don’t assume that you’re getting something that you’re not.

The main issue that you need to understand is that the Quizzle score you receive, even though it is based on Equifax data, isn’t your true FICO score. It’s what is often referred to as a FAKO score. What that essentially means is that it’s a score that’s generated by looking at many of the same elements that your true FICO uses, but since it isn’t coming from FICO, the score will not be exactly the same. The score could be slightly higher or lower than your true FICO score. Quizzle recently began using what is called a VantageScore version 3.0 to produce it’s results.

There is a specific reason why Quizzle uses VantageScore version 3.0 to generate a score rather than your true FICO score; it’s significantly less expensive to do so. If they were to give you your FICO score, the business model that they use to generate income wouldn’t work. The FICO score would be too expensive to make it work, so they opt for a score which is much less expensive for them to obtain, but it’s still based on many of the same criteria that go into creating your FICO score.

If the main reason that you want to see your credit score is so that you can track it from month-to-month to monitor if there are any substantial changes to it which may indicate that something has changed in your credit report, then the Quizzle score may be perfectly acceptable. In fact, one of the bonuses that they offer that their main competitors don’t is a free Equifax credit report twice a year in addition to the free score monthly. If, however, you are looking to take out a loan of some type, then you probably want to know what your FICO score is, and not an approximation of it.

Another important factor to keep in mind is that if you do use their site, you’re giving a third-party access to your sensitive financial information in order to get the free score. Any time that you give your financial information out to a third-party website, there is always the chance that there could be security breached, and your information may be exposed to those looking to commit fraud. This is especially important to consider because there are a number of ways that you can obtain a free credit report without giving your financial information to a third-party business.

The good news is that anyone wanting to use Quizzle doed’t have to be worried about it being some type of scam. The company is legitimate, and you’re able to obtain a credit score for free without major catches involved. They will generate a score that is an approximation of your FICO score, but it will likely be slightly higher or lower then your true score. In return, you will be offered advertisements and lead generations, and you must also be willing to give some of your personal financial information to Quizzle.