Understanding FAKO Scores: What They Are and How They Differ from FICO Scores
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Summary:
“FAKO Score” is a term used to describe credit scores other than the FICO Score, often considered derogatory. These scores, offered by various websites like Credit Sesame and Credit Karma, may differ from the FICO score, leading to confusion among consumers. Understanding the differences and limitations of FAKO scores is essential for making informed financial decisions.
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What is a FAKO score?
A FAKO score is any credit score that is not the FICO Score developed by the Fair Isaac Corporation (FICO). While the FICO Score is the most widely recognized credit score, numerous other scoring models exist, often provided by financial websites and institutions.
How FAKO scores work
FAKO scores are created by various entities using their own proprietary algorithms. These scores aim to provide consumers with an estimate of their creditworthiness but may not align precisely with the FICO Score. Despite their differences, FAKO scores often utilize similar credit report data from major credit bureaus such as Experian, Equifax, and TransUnion.
Consumers commonly rely on the FICO Score’s range of 300 to 850 to gauge their credit health. However, FAKO scores can cause confusion as they may produce scores outside of this range or utilize different scales altogether. This discrepancy has led to the term “FAKO score” being used to describe these alternative scores, sometimes in a derogatory manner.
How FAKO scores differ from FICO scores
While FICO scores consider factors like indebtedness, payment history, types of credit, credit history length, and new credit accounts, FAKO scores may use different weightings for these factors. This variance in calculation methodologies can result in significant score discrepancies, impacting a consumer’s perceived creditworthiness.
Real-world example of a FAKO score
Credit Sesame and Credit Karma are two popular providers of FAKO scores. These companies offer proprietary credit scoring models, which may yield scores slightly different from the FICO Score. Formerly, Quizzle was also a prominent provider, but its services have been integrated into Bankrate since 2018.
Frequently asked questions
Are FAKO scores reliable?
FAKO scores can provide a general idea of creditworthiness but may not always align with FICO scores used by lenders. Therefore, they should be considered as estimates rather than definitive measures of creditworthiness.
How do FAKO scores affect loan approval?
FAKO scores may impact loan approval probabilities and interest rates offered to borrowers. Lenders primarily rely on FICO scores, so discrepancies between FAKO and FICO scores can lead to differences in loan eligibility and terms.
Can FAKO scores be improved?
Improving FAKO scores involves similar strategies to improving FICO scores, such as maintaining low credit card balances, making timely payments, and diversifying credit accounts. However, specific score improvement tactics may vary depending on the scoring model used.
Key takeaways
- FAKO scores are credit scores other than the standardized FICO Score.
- They may differ significantly from FICO scores, leading to potential confusion among consumers.
- Popular examples of FAKO score providers include Credit Sesame and Credit Karma.
- Understanding the differences between FAKO and FICO scores is crucial for making informed financial decisions.
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