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FICO vs. FAKO: Making Sense of Different Scores

 
By Eva Norlyk Smith, Ph.D.
August 10, 2011

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There are FICO scores, and then there are FAKO scores. The success of FICO scores has spawned numerous other credit scoring models, all of which have slight variations in how they profile consumers.

FICO scores are the gold standard of credit scores. However, most consumers are offered other types of credit scores when they sign up for credit monitoring or pull a free copy of their credit report at AnnualCreditReport.com.

According to a recent report by the Consumer Financial Protection Bureau, consumers are often flummoxed by these different credit scores. After all, just trying to keep track of the numerous factors that impact your credit score can be confusing, and the abundance of different credit scoring models doesn’t help.

If credit scores provide a picture of a person’s creditworthiness, how can there be so many different scores, all giving a slightly different picture of a person’s credit situation?

“People tend to think of credit scores as these really precise measurements of how creditworthy one is,” says Joe Ridout of the consumer advocacy group Consumer Action. “But, in truth, there are many factors that come into play, and credit scores are only crude estimates.”

Credit scores from other models, including those from the three credit rating agencies, are often informally referred to as FAKO scores. Here is an overview of the main types of FAKO scores and their scoring range.

  • Equifax. Credit scores from Equifax are referred to as the Equifax Credit Score. The Equifax scoring model produces scores ranging from 280 to 850.
  • Experian. Experian credit scores go by the name of Experian Plus Scores. Scores range from 330 to 830.
  • TransUnion. TransUnion scores are called TransUnion’s TransRisk New Account Score. The scoring range is similar to that of FICO scores, with scores ranging from 300 to 850.
  • VantageScore, LLC. VantageScore credit scores are based on a generic scoring model developed by a joint venture established by the three credit rating agencies as an alternative to FICO models. The VantageScore model uses the same scoring formula across all three credit reporting agencies to give a more accurate picture of a person’s credit history, according to Experian’s website. VantageScore credit scores range from 501 to 990.

So, which score should you get, and does it even matter? It depends on your goal, say experts.

If you simply want to keep an eye on your credit score over time, Ridout says that using a free online FICO score estimator is usually enough. This won’t give you your exact FICO score. However, FICO score estimators can help you track changes to your score based on changes to your financial situation or habits. And that is often what most people need to stay on top of their credit score.

However, if you’re planning to take out a large loan like a mortgage, pulling a copy of your credit score beforehand to see where you stand can be important. In that case, the Consumer Financial Protection Bureau recommends obtaining a copy of your FICO score because this is the score lenders are most likely to take into account when evaluating mortgage applications.

However, consumers should note that even with FICO scores, there can be differences based on which credit report the score is based on. The information in the credit reports from the three credit reporting agencies often differs. So to get the most complete picture, you would ideally look at your FICO score for each of your credit reports from the three rating agencies.

FICO scores based on your TransUnion and Equifax credit reports are both available at MyFICO.com. You can either purchase a one-time view or sign up for a subscription for repeated views. Unfortunately, FICO does not have an agreement with Experian to provide FICO scores based on Experian credit reports, so at this time, it’s not possible to see what your FICO score would be based on your Experian credit file.

Still, if you’re looking to apply for a large loan, pulling your FICO score based on the Equifax and TransUnion credit reports will give you a more complete picture of where you stand. It can also alert you to any mistakes or damaging information in one report that may cause the FICO score based on that report to be lower.

The more precise the picture you have of your credit situation, the more you can work with lenders to make sure you get the best possible loan terms. For larger mortgage loans, a lower rate of even half a percent can save you tens of thousands of dollars over the life of the loan. So your initial investment in pulling those FICO scores might well net you a very nice return.


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