Credit Reports, Credit Scores, FICO, & FAKO Explained

This year, I’m trying to make my posts more modular so I can interlink them more easily. I’ve mentioned several of these bits and pieces about credit reports and credit scores before, but I wanted to put it all together at least once. Here goes:

Credit Bureaus

There are three major credit bureaus that collect and track your personal financial data. They are Equifax, Experian, and TransUnion. The information they collect is called your credit report.

Credit Reports

There are generally four types of information on your credit report. Instead of reinventing the wheel, I’ll just quote from here:

• Identifying Information. Your full name, any known aliases, current and previous addresses, social security number, year of birth, current and past employers
• Credit Information. The accounts you have with banks, retailers, credit-card issuers, utility companies, and other lenders (accounts are listed by type of loan, such as mortgage, student loan, revolving credit, or installment loan; the date you opened the account; your credit limit or the loan amount; any co-signers of the loan; and your payment pattern over the past two years).
• Public Record Information. State and county court records on bankruptcy, tax liens, or monetary judgments (some consumer reporting agencies list non-monetary judgments as well).
• Recent Inquiries. The names of those who have obtained copies of your credit report within the past year (two years for employment purposes).

You can obtain a free copy of your credit report from all three major credit bureaus once every 12 months from AnnualCreditReport.com, as mandated by the government.

Credit Scores

Organizations can then use this data along with other broader consumer statistics to predict your creditworthiness and likelihood of defaulting on a loan. The most popular and well-known is FICO, short for Fair Isaac Corporation. Basically FICO has developed a proprietary “secret formula” that uses your credit bureau info to create the FICO credit score. Companies buy this score from FICO and use it to decide things like your loan interest rate or even your auto insurance premium.

Since there are three credit bureaus, you have three separate FICO scores. Your Equifax FICO will likely be different from your Transunion FICO. Since FICO is the one most often used by lenders, it is also highly protected and FICO usually charges you around $16 to access it. Your FICO score is number that ranges from 300 to 850.

However, the three credit bureaus wanted their own share of this lucrative industry, so they started their own credit scores using their own secret formulas. These have been nicknamed FAKO or “FAKE-O” scores and have names like VantageScore, PLUS, Transrisk, ScoreX, and so on. These often have a very similar numerical range as FICO with a 850 maximum score.

So now you have several “credit scores” floating around out there that are probably somewhat related but not guaranteed to be the same, because they are based on different formulas. Sometimes folks have their FICO go up, but a FAKO go down, even when based on the same exact information from the same credit bureau.

In my opinion, I try to avoid paying for a credit score whenever possible, but if I was going to pay for a score, it would be a FICO score since that is used most often by lenders. FAKO scores are fine for a general estimate, especially when they are free.