What are FAKO Credit Scores And How Do They Stack Up to FICO Scores?

One of the most important aspects of your finances is your credit score. This three-digit number sets the tone when you apply for loans, determining whether you are approved and what terms you can expect. On top of that, some insurers use your credit score to set your premium payments, and some landlords ask for higher security deposits from tenants with poor scores.

A good credit score can save you thousands of dollars over your lifetime, mainly through savings on interest rates and insurance premiums. As a result, it’s important to keep track of your credit score.

That’s the easy part. The hard part comes when you learn that you likely have numerous credit scores, not just one. In fact, you probably have several FICO scores, too. Let’s try to sort through all the confusion.

What is Your “Real” Credit Score?

There are a number of web sites and companies that offer credit scoring models. It’s possible to visit many of those web sites and get a credit score for free. Most of these sites, however, do not offer FICO scores.

Most lenders use the FICO score, which is put out by Fair Isaac Co. This score weighs a number of factors in your credit history and uses a mathematical formula to assign you a number. The higher this number, the more responsible you are considered. If you are considered responsible, and a low credit risk, you will be eligible for the best loan terms, saving you money.

You can learn more about FICO scores in this podcast interview of FICO’s credit expert, Tom Quinn.

Other companies use their own formulas to assign you a score based on information in your credit reports. These companies have access to the histories kept by the three major credit bureaus (Equifax, TransUnion and Experian), and they use their own systems to provide you with a credit score. These scores are often called FAKO scores because even though they are measures of your credit worthiness, they aren’t the same as a FICO score, which is what many consumers think of when they consider credit scoring.

When you access a FAKO score (the industry calls them educational scores), it’s important to understand that you might not be looking at an accurate representation of your FICO score. In fact, the different weighting, information and formulas used in educational scores may differ by 20 points or more from your FICO score. This can give you a false sense of hope (or fear) in some cases. You might think that you qualify for the best loan rates based on an educational score, but find out that you don’t qualify because of your FICO score.

This case study compares the FICO and educational scores of Dough Roller’s founder, Rob Berger.

It’s important to note that FICO scores aren’t uniform. There is a different score based on the information in each of the credit reports you have. Additionally, FICO sells different versions of its formula to lenders based on their needs. For instance, there is a FICO score that emphasizes factors that lenders place more weight on when making decisions about mortgages. This is a score that is different from a “regular” consumer score, but it is still a FICO score.

Should You Pay for FAKO Scores?

There are plenty of web sites that will let you track your credit and look at your educational score for free.

However, there are other web sites that charge you to look at your credit score. They may advertise a free credit score, but you have to enter your credit card information and sign up for a free trial of some sort of credit monitoring product. It could end up costing you in the long run if you aren’t careful. In fact, if any site asks you for a credit card before you can access your FAKO score, consider looking elsewhere for your credit information.

FICO charges for access to its score, but it is making agreements with lenders to provide free scores to consumers. For instance, First Bankcard and Barclaycard US have agreements to provide FICO scores to their account holders for free. If you go to the FICO site you still have to pay for your score, but if you have a loan (including a credit card) with certain lenders, that information will soon be free, although you won’t have access to some of the tweaked versions of your FICO score.

You can get both your FICO score and educational scores for free. Here are several ways to get your credit scores for nothing.

What are FAKO Scores Good For?

So does this mean FAKO scores are of no use? Nope. They can be helpful if you are looking to track your overall credit situation. Free FAKO scores, tracked through reputable and free credit scoring sites, can help you keep on top of your credit situation. You can use your FAKO scores as benchmarks to get an idea of which direction you are moving. Is your credit situation improving or deteriorating? You can get a rough idea of where you stand, on a regular basis, with the help of FAKO scores.

Then, after you think you have improved enough to make it worth applying for credit, you can look at your FICO score.

Published or Updated: December 12, 2013

Comments

  1. Rob Berger says:

    I agree that there is no reason to pay for a non-FICO credit score. I do think the free educational scores consumers can get from Credit Karma or Credit Sesame are very useful. While they are not based on the FICO formula, I use both services to track my scores and to understand how to improve my score.

  2. Susan Henson says:

    Categorizing all non-FICO scores as “fake” is wrong and it causes consumers confusion and frustration when myths like this are perpetuated. There are many different scoring models that co-exist in the marketplace today, including generic scores used by lenders like the VantageScore model, lenders’ own proprietary scoring models and educational scoring models.

    Each of these types of models has a different approach and offers strengths that can be very effective for a specific application. If the industry relied on only one scoring model or one provider of scoring models, lenders would not be able to utilize proven scientific approaches to determining fair terms for credit. Effectively, if lenders were not able to determine lending risk through tools like credit scoring models, consumers would pay more for credit.

    Not just lenders benefit from a diversity of scoring models. Consumers are also benefiting. One example is how the VantageScore model incorporates rental payments so those consumer who pay their rent on time can build a positive payment history. This can help millions of consumers have greater access to mainstream credit.

    We’ve come a long way in advancing the science of credit scoring thanks to healthy competition in the marketplace.

    • Rob Berger says:

      Susan, I think it’s unfair to describe Miranda’s article as characterizing all non-FICO scores as “fake.” They aren’t FICO scores, however, and that’s a point consumers need to understand. The article also describes how educational scores can be useful: “So does this mean FAKO scores are of no use? Nope. They can be helpful if you are looking to track your overall credit situation. Free FAKO scores, tracked through reputable and free credit scoring sites, can help you keep on top of your credit situation. You can use your FAKO scores as benchmarks to get an idea of which direction you are moving. Is your credit situation improving or deteriorating? You can get a rough idea of where you stand, on a regular basis, with the help of FAKO scores.”

      In fact, I monitor my credit through services like Credit Karma and Credit Sesame, neither one of which offer consumers FICO scores. That being said, the majority of creditors do use FICO scores to make lending decisions, which is just one reason why consumers need to understand the difference between FICO scores and other scoring models.

  3. ERL says:

    Calling all non-FICO scores “FAKO”, sets the tone of the article, and let’s us know where you stand without the need to read further, even though you make some good points about why these “FAKO” scores and reports can be very useful.

    All of these different scores and reports represent a very puzzling and confusing picture for the consumer. Even FICO scores themselves are many and varied, depending on how much capital FICO wishes to squeeze out their material. However, I would echo the point that relying on and championing one private corporation to provide all of our credit scoring data is a more than slightly troubling.

    I should also point out that if some lenders use non-FICO scores when making decisions about whether they lend money, then they can’t be exactly “FAKO”, can they? They’re quite real.

    • Rob Berger says:

      ERL, you make some good points. The reality, however, is that the vast majority of creditors use some version of the FICO score. But perhaps that will change over the coming years.

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