FICO Vs FAKE-O Scores: Are You Seeing What Lenders See,

Over the last several years, a new set of players have joined lenders, borrowers, and credit bureaus in the credit system. These new players are credit report/score wholesalers, and they have taken the internet by storm and they don’t even offer FICO scores. Many of these wholesalers are wholly-owned subsidiaries of the credit bureaus or large financial institutions.

Currently, there are two kinds of wholesalers who offer two very different types of credit reports: industry-specific FICO score providers and FAKE-O score providers. Various versions of credit scoring have been attempted by financial institutions for over the last 60 years. It wasn’t until the 1990s that Fair Issac became the industry leader in consumer credit scoring. Fair Issac is NOT a credit bureau—it is a completely separate company that sells scoring software to lenders.

This software scores the data that lenders download from the credit bureaus when pulling a credit report. The three digit number that results from this software analysis is called the FICO Credit Score. Industry wholesalers provide mortgage brokers and mortgage lenders with mortgage-specific credit reports, to which mortgage lenders can subscribe and purchase.

1. A mortgage broker enters your information into the credit report provider’s software on their computer. 2. The wholesaler’s software pulls your credit profile data from the three national credit bureaus and applies the mortgage-specific FICO scoring software to your credit profile data and then delivers a mortgage credit report and the accompanying mortgage scores.

These credit scores are legitimate credit scores—FICO mortgage scores. When we refer to this credit report/score being “weighted,” we mean that mortgage-specific FICO software evaluates how you have treated your past mortgages. The score that is printed out on your mortgage credit report reflects this screening process. At the time of this writing, Fair Issac, the developer of the FICO Scoring software, has 88 products to help financial institutions grade borrower trustworthiness according to purchase type. By using industry-specific screening software, lenders lessen the risk of financial loss.

FICO scoring software have been developed for mortgage companies, auto dealers, credit card companies, health care insurers, telecom companies, and cellphone providers, among many others. Until recently, credit scoring was a well-kept secret. Many people were outraged when they found out they were being financially judged by a number that they not only didn’t understand, but had no control over.

As public outrage increased, the media started making a fuss about the then “secret” score that could make or break a lending decision. To remedy this situation, Congress ordered the credit bureaus to offer free credit reports once per year so consumers could monitor and take control of the information in their credit profile. But that didn’t solve the problem—it actually made things worse.

Consumers didn’t just want copies of their credit reports—they wanted access to their credit scores. Under the guise of fulfilling the mandate imposed by Congress, the credit bureaus began offering credit reports via the internet (up to this point, consumers had to receive their credit reports through mail). But being the professional profiteers that they were, the credit bureaus soon found that they could provide the Congress-mandated credit reports for free while charging a fee for the actual credit score. Unfortunately, the credit scores that they offered were completely bogus.

Today, over 90% all lenders use some version of the FICO scoring software. But the credit scores that the bureaus began to sell to consumers on the internet were not the scores lenders used. Any credit score that does not have the FICO registered trademark is what we affectionately call a FAKE-O score. As the name suggests, the scores that are offered by this site are actual FICO scores—28 of them.

More importantly, you can also discover what your credit score is as calculated by ALL the versions of software FICO that have been developed over time. Another well-guarded secret kept by lenders is the version of FICO software they use to grade borrowers. The most prominent competitor attempting to replace the FICO standard is called VantageScore.

It’s a scoring system developed by a consortium of all three credit bureaus that rates creditworthiness similar to school grades. Experian credit report to prove their point. But the score is artificially high because it is a VantageScore. To estimate your FICO score in comparison to the VantageScore, simple multiply your VantageScore by 86%. For example, if your VantageScore is 805, your estimated FICO score would be 692. This exercise is an estimation only. Each scoring system uses different scoring criteria and so the comparison will not be exact. Are you TRULY fundable, Find out now with our free Fundability Checklist.

Your credit score is a judgment about your financial health, at a specific point in time. It indicates the risk you represent for lenders, compared with other consumers. There are many different ways to work out credit scores. The credit-reporting agencies Equifax and TransUnion use a scale from 300 to 900. High scores on this scale are good. The higher your score, the lower the risk for the lender. Lenders may also have their own ways of arriving at credit scores.