FICO and FAKO Credit Scores

What Credit Score Decides the Status of Your Credit Card Application?

Equifax's ScorePower, Transunion's Credit score and Experian's PLUS score must have become all the usual for you terms expressing the numeric value of your credit worthiness. Or, you may have never heard of all these specific names and have known only about the existence of just the credit score, or FICO as most of us call it.

Very few credit consumers are aware of the big difference between credit scores in general and FICO scores and have taken them as one and the same thing. This misconception very often leads to confusion and trouble when it comes to applying for a credit card or a more serious loan which, involves evaluating you as a credit worthy or risky customer.

Let's see what different credit scores are used by various lenders and how they determine your application status.

A bank's or other lender's decision to grant you credit depends on the credit score they basically use. The type of the credit score is determined by the company your lender is in business with. Thus, there are two major types of score you need to learn about if you want to make sure which lender is most certain to approve you.

The score that you get from one or all the three national credit bureaus is referred to as FAKO score and it can vary from one agency to another with just a slight difference. When a customer looks to apply for a credit card or a car loan, he/she writes to the credit bureau with the intention to purchase the score and know his/her chances with the lender.

Well, you are on the right way doing so, if you know for sure that your creditor uses FAKO score, and not any other type of scores, for estimating your credit risk.

One of our readers complains that he was denied in a car loan even though his credit scores, provided by all the CRAs, were high. How can it be? The thing is, most lenders, when considering granting you a serious loan, such as an auto loan or mortgage, do not take your FAKO scores as a basis. They rely on FICO, and this is quite a different thing and its calculation method is a brand secret. If you want the true numeric value of your credit worthiness, the value that creditors are most likely to look on, then you need to purchase FICO scores at the special website owned by Fair Isaac Corporation.

Almost all financial experts and advisors call FICO score as the most important financial number in the life of any financially active citizen. There is no sense to deny that if we recognize ourselves as a credit-dependent nation and we still are.

So, the present-day reality is that there can be many various credit scores, the ones purchased in credit bureaus, calculated by the lenders themselves and others, but the crucial score is that obtained from Fair Isaac.

If you are planning on a big, high-value purchase, ask your lender beforehand what credit score they look at, FAKO or FICO, and purchase that score to know your chances. Remember that the interest rate on your loan or credit card will depend on the credit score. So, why go to a lender using a score that may cause denial or a sky-high interest?

Doug Nicholas

Doug Nicholas, a financial consultant by profession with a Masters degree in International Business from Brown University, is also an ardent writer. Though he has a full time job at one of the companies listed on Wall Street, he does manage to squeeze in time to follow his passion. He puts his ideas to words in his articles related to finance and business.