The Best Fico Score is the One Free of Charge
Many consumers have been asking whether the free credit scores on the market are accurate. Is credit karma accurate? Is credit sesame accurate? If there are difference in their credit reports which one is more accurate. To get down to the bottom, you need to understand different score models. If you follow the consumer credit scoring market then you’re probably familiar with the phrase “FAKO” score. A FAKO score isn’t an actual credit score. Instead it’s a derogatory phrase given to any credit score that isn’t built by Fair Isaac, or a “FICO” score, specifically the FICO 8 score, the most recent of multiple versions of FICO scores. Any non-FICO score is deemed fake because it isn’t something lenders used.
The genesis of the term remains unclear but I believe it was Suze Orman who coined the phrase many years ago after she began selling FICO scores on QVC and on FICO’s website. At that time there was a very limited number of scores available for consumer purchase and the only one that was a score that lenders could use for underwriting was, in fact, the FICO score. The last several years have seen a considerable change in the credit scoring world and the term FAKO score doesn’t really apply any longer.
Today there are many credit score types available to consumers and all of them are real credit scores available for use by lenders. For example, the Experian National Risk Model score is given away for free here at CreditSesame.com. According to Experian, “many lenders and other businesses use the National Risk Model.”
The VantageScore credit score, developed by VantageScore Solutions, has been on the market for lenders to use since 2006. According to Experian some 1,300 lenders are getting the VantageScore. That VantageScore is also commonly available for consumers.
When you combine the commercial usage volume of both the VantageScore credit score and the Experian National Risk Model score, no reasonable person would refer to that as being “FAKO.”
The question then becomes more about what score your lender will likely pull when you apply for credit. Even then the answer is unclear. The lender may pull a FICO score or they may not. You can’t control that process.
If they do pull a FICO score they will pull one of over 50 different score options currently on the market. We profiled the number of FICO scores available to lenders a couple of years ago in this infographic. Given that FICO will be rolling out a new model generation some time this year, that number is likely to balloon into the mid 60s unless one or more of the credit bureaus decommission older FICO score software.
VantageScore, conversely, has only three score generations on the market. This is a product of them being relatively young in the credit scoring market. When you add together all of the FICO, VantageScore, Experian National Risk Model and other commercially available credit bureau scores the number gets much closer to 80 than it does to zero.
If your definition of a FAKO score is any score that your lender isn’t using then pretty much every credit score is a FAKO score. If your definition of a FAKO score is any score that is not commercially available then pretty much no score is a FAKO score. At this point the term FAKO has really lost it’s place in the credit score discussion.
Because the chances of you seeing the exact numeric score a lender will see is almost zero, the next best option becomes directional accuracy. Directional accuracy refers to scores, of any type, that are close to whatever the lender ends up seeing. So, if your Experian National Risk Score from CreditSesame is 753 and the lender pulls a score of 771 then you have directional accuracy. Both scores suggested that you are a low risk borrower, which is really what providing you with a FICO score for free is all about.
More on Credit Scores from Credit Expert, John Ulzheimer: