I would like to take the opportunity to provide you the difference between FICO verses FAKO. The term Credit Score is a generic terminology that is used to refer to the numeric value given to your credit history. Basically your credit score is calculated based on information contained in a credit report.
There are a few companies that sell credit scores. Each of the credit bureaus has their own version of the credit score. Equifax has PLUS, Experian has BEACON, TransUnion has EMPIRICA.
However, there is a new score called Vantage Score that has been developed by the three bureaus that also looks at non-traditional forms of debt, such as apartment rentals, leases, and utility payments.
How Does This Effect FICO Scores?
Unlike FICO’s traditional 300 to 850 scale, the VantageScore goes from 501 to 990, as reported by TransUnion:
- A: 901–990
- B: 801–900
- C: 701–800
- D: 601–700
- F: 501–600
A person's VantageScore might not be exactly the same from each credit bureau, since the data each credit bureau collects could still vary. However, in theory, the VantageScore should be more consistent across all three credit bureaus, since the same calculation formula is used across the board. Here is the breakdown of VantageScore.
| Category | Description | Weight |
|---|---|---|
| Payment History | how timely and consistent your payments are | 32% |
| Credit Utilization | debt-to-credit ratios and how much credit is available | 23% |
| Credit Balances | what your total debt is; most likely, delinquent debt is counted more harshly than current debt | 15% |
| Depth of Credit | length of credit history | 13% |
| Recent Credit | how recent and many new hard inquiries and new accounts there are | 10% |
| Available Credit | how much credit can be accessed, for example, could you spend $50,000 of credit tonight or within the next week | 7% |
It’s important to know the difference with your credit scores and report.
Your credit report is a tickler file of your past financial behavior. mostly showing how you deal with debt. If you’ve have a bankruptcy, short-sale, or had a foreclosure in your past, all of this will be recorded in your credit report. There are credit bureaus, agencies and independent companies that collect all this credit information into one convenient 3 digit number via an algorithm, resulting in a credit score. With credit scores, things are not as cut and dry as they are with your credit reports, since you can obtain different versions of these numbers from a variety of places, the most well known and widely used by banks and lenders is the FICO score, but other alternatives also exist, called “FAKO”) scores.
Why is there different types of scoring?
There’s a licensing cost to use FICO, which has prompted some financial companies that need to buy and use scores, to opt for the more cost effective solution of developing or resorting to proprietary scoring models. Many financial companies are high volume users of such scores, since they evaluate risk levels for lots of accounts. This chance to grab a piece of the credit score market has encouraged reporting agencies to develop and offer their own scoring system to the public.
You may end up applying for a loan based on the “wrong” credit score (one that your lending is not using - a FAKO score). I’ve heard about people ending up with expensive loans than they bargained for, because they were relying on numbers that were different from those used by their lenders. So before paying to see your score, make sure you know what it is you’re picking up. Ask your lender or bank what they’re using: is it a FICO or a Vantage score that they’re basing their evaluations on? Better yet, some banks may be willing to share your credit information with you for free, so it doesn’t hurt to ask!
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