Do You Know Your Real Credit Scores?
Initial Phone Call
As a REALTOR® that specializes in creative transactions (i.e., Lease Options and Seller Financing), I get a lot of calls for people who think this is their only way of getting into a home. They prefer to not rent but don’t believe they can buy.
One of the first questions I ask them is, “Do you know what your credit looks like?”
They almost always say “Yes. It’s not good.”
I will always respond “Have you talked with a lender?” trying to understand how do they know their credit isn’t all that good. Talking with a lender is a great way to know your real scores and what you will need in order to get financing.
The most common response is, “No”.
They will usually say they got their scores from Credit Karma.
This is usually the first moment of an extensive conversation as to why they should not use Credit Karma as a way of getting their scores.
My Opinion Credit Karma Scoring
I am not here to knock Credit Karma, though. They are a great company and they have a wonderful site and I do highly recommend them. Their site has many features that will help you that nobody else can offer. The only thing you should avoid with them is their scoring system. In my experience, it is about as accurate as flipping a coin while blindfolded and walking a tightrope between two buildings.
The scores on their system is an approximation of what they think how each repository’s (Equifax, Experian, and TransUnion) algorithm is calculated. Again, that is an estimation of how someone else’s systems calculate the results. It is not the actual algorithm!
There are a number of ways to get check your actual scores and they are absolutely free.
The best way, in my opinion, is to talk to a mortgage lender. Just do an online search or contact me if you are a Las Vegas potential buyer.
The other way is because federal law in the U.S. says you can check your credit once a year for free. The easiest way is to do a search online for your free FICO scores. Make sure you are getting the real FICO score and you are able to get all three. One site to get your free annual report is www.annualcreditreport.com.
To get monitoring you can I would suggest going to FICO itself (www.myfico.com).
In the past, I have compared my FICO scores with Credit Karma on the same day. Once it was over 100 points lower on Credit Karma than on FICO. This is a huge error! If I was wanting to buy a home I could think I was disqualified without me ever knowing that I was more than qualified.
Credit Karma Kudos
Credit Karma has some great features, though. Here are some good things about Credit Karma and why I like them so much.
First, they are connected with Capital One, Chase, Indigo, and numerous other credit card companies. This is great news because one of the ways to build credit is to get new trade lines. And, Credit Karma will pre-approve you based on what they think your scores are (which are typically lower than your actual FICO scores). Then you can apply for those cards for additional lines of credit. (See blog on how to raise your scores.)
Also, Credit Karma has credit monitoring services for free. Thus, you can monitor what is going on with your credit usage. This is a great way to ensure your identity isn’t stolen with updates on your card usage.
Knowledge is power when buying a home. There are many pieces for this process and having good credit is one of them. Check with a local professional to further assist you on this subject.
Read More on Other Buying Tips
Find out more on what you need to do before you buy a home.