FICO or FAKO Score?

FICO®, FAKO, - What Are All These Credit Scores?

 

The lingo used to talk about credit scores can be confusing. On any given personal finance website or in any given book, you might see the term credit score. Or you might see FICO score. Still, there's another credit score term that's been thrown around - FAKO score. What are all these different scores and what do they mean? Which one is the "right" one?

 

Credit Score is Generic

Let's start at the beginning. Think of "credit score" as a generic term that used to refer to the numeric value given to your credit history. Your credit score is calculated using information contained in your credit report. There are a few companies that sell credit scores. Each of the three major credit bureaus has its own version of the credit score. Equifax has PLUS, Experian has BEACON, TransUnion has EMPIRICA.You may have also heard about the Vantage Score, a newer score developed by the three major credit bureaus, that also considers non-traditional forms of debt like apartment leases and utility payments.

 

FICO is a Brand

The FICO score is a branded credit score, developed and administered by a company called Fair Isaac.

For the analogical-minded - credit score is to FICO as bandage is to Band-Aid.

 

What about FAKO?

FAKO score is used to refer to any credit score that's not a FICO score. If you purchased your credit score from anywhere but myfico.com, then it's a FAKO score.

 

What's the Difference?

As far as we know, all the credit scores are generally calculated the same manner. Since we can't see each company's exact formula (they won't tell you, and it continuously changes) it's hard to pinpoint the specific differences.   Creditors and lenders use the credit score from the company they have a business relationship with. It could be a credit bureau's credit score, the FICO score, or the lender's own credit score. The only way to find out is to have your lender tell you (many won't).

 

Which Should I Care About?

There're just too many different credit scores out there for you try to improve all of them individually. If you're working on improving your credit, use the FICO score as your basis. If you focus on bringing up your FICO scores, the other "FAKO" scores will come up as well.   If you're going to apply for a loan, it won't hurt to purchase the other three bureaus' credit scores to gauge where you stand overall.

 

To find out more about FICO, click on the link to MyFICO   To learn more about the Fair Isaac company, click on the link to   Fair Isaac Company

 

Your Beacon, FICO, and Empirica credit scores will almost always be different, even though the scoring models within each of them were jointly developed with Fair, Isaac and Co.

A major reason for the difference: Beacon relies on Equifax data, FICO relies on Experian data, and Empirica relies on Trans Union data. The three bureaus don't share information with one another. They have different ways of representing your data. They have different business customers making inquiries about you. Often, there are differences in which companies report to them. This results in scores that could be very different.

 

VantageScore

In early 2006, the three credit bureaus announced a new score model, called VantageScore. Now, for the first time, a score model is available that uses the same computations, the same scoring scale, and the same reason codes, whether the data comes from Equifax, Experian, or TransUnion. Significant differences will occur only when the bureaus have used different sources or time frames to collect the data about you.   To find out more about the VANTAGE Score, click on this link: VANTAGE Score

 

VantageScore evaluates your credit as a number from 501 to 990. The ranges 901-990, 801-900, 701-800, 601-700 and 501-600 denote A, B, C, D, F ratings, respectively, much like letter grades in school. It will be a while before VantageScore is widely used by credit grantors. They'll need to do their own studies to determine how the new scores compare to those from Fair, Isaac, and Company, and whether or not the new scores do a better job of predicting creditworthiness. It may also take some time for the bureaus to begin disclosing VantageScore to individual consumers.

 

A Scoring Model for any Need

TransUnion's Empirica scores come many variations, each of which is different. There's a version for automobile financing, a version for installment loans, a version for bank cards, and a version for personal finance. The same applies to Experian's FICO scores and Equifax's Beacon scores. In addition to the generally available scoring models, many credit grantors have customized models for their own particular needs.

 

The Old and New Fico Score

From time to time, computation methods and weightings in a scoring model are updated, but many lenders want to stay with the old "algorithm", because they've built their decision rules over time and they aren't ready to change. So, for example, there's Empirica 95, and the current version of Empirica. There's Beacon 96, and the old version of Beacon. There's FICO and "classic FICO".

 

In summary

It's as clear as mud, right?   Don't feel alone - most consumers (and most lenders) don't have a clue as to how these scores and calculations work, let alone how they are maintained and adjusted to meet economic conditions of the day.   All you really need to know is this;   It's their game, they make the rules, and we all have to play by them.