Why Your Free Credit Score Doesn't Always Add Up

Your credit score makes the difference between getting approved or denied a mortgage, car loan, student loan--or any other kind of loan. With plenty of online tools to check your credit score for free, there's no reason you shouldn't know the magic three-digit number. But how accurate are these online tools? Here's what to know about the difference between the free credit score you get online versus the score that a lender uses before extending you a line of credit (or not).

Not all credit scores are the same

You don't have just one credit score. Instead, you have several different credit scores that come from different models (or versions of models) used to calculate your creditworthiness. Most credit scores in the U.S. come from one of two scoring agencies: FICO and VantageScore.

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The free scores from sites like Credit Karma or TransUnion are usually calculated using the VantageScore model. (Note: When you use a free credit score service, the scoring model should be listed with your results.) What most lenders see, however, is your FICO score. To make things even more complicated, both scoring agencies update their models from time to time, and different lenders might use different versions of those models.

All of this boils down to the fact that when you use a free service to get your credit score, it most likely is not the exact same number a lender uses. However, this doesn't mean that your free credit score is totally useless. The difference between your VantageScore and FICO scores is nothing to sweat over, so long as you're in the same credit score range.

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Your credit score range is what's important

The exact three-digit score you get will depend on the model used, and it may edge up or down depending on something like a missed payment or two. Rather than obsessing over the precise number, what matters most is the range of your credit score.

For instance, here's the score range that Credit Karma uses:

Compare that to the breakdown for the FICO scoring model:

The only reason your VantageScore versus FICO score will impact you is if you have a borderline score--say, something in the low 600s that looks like "good" to you but "fair" to your lender. A borderline score could make the difference between getting approved for a loan or not.

The bottom line

Free credit scores may not be completely accurate, but they're still a useful tool for understanding where you stand with creditors. They're a no-cost option to see if there's something seriously wrong with your credit profile, or to see if you have a borderline score that you should try to edge up a few points before you make certain financial moves. If you want to up your score, read more here.