This recently came up in conversation, so I thought it prudent to cover in a blog post because there is still a lot of confusion out there.
CREDIT SCORE: What is it? How Many Types Are There? Which Matter?
A credit score
is a number assigned to you by the credit agencies/bureaus (TransUnion
) based on your credit “worthiness.” Lenders, like banks, credit card companies and automotive and student loan companies, use your credit score to determine if they want to lend money to you and if so, how much they want to give you. In other words, they assess their risk in lending to you based on that number known as a “credit score.”
Your FICO Score
A FICO (formerly known as the Fair Issac Corporation) score is the holy grail of all types of scores and it is the ONLY one lenders rely on when making decisions about lending money to you. Bottom line – FICO is it.
Your FAKO Score
That’s right. Your FAKE-O score. It’s called that because that is exactly what it is – your fake FICO score. It’s preferably called your “educational” score by FAKO industry insiders, according to Kevin Mulligan
, a contributing author at Wealth Pilgrim
. But it’s not like a FAKE ID. A FAKO score can actually be a useful tool for you in benchmarking your credit score history over time. Just be sure that you aren’t suckered into paying a fee for this score. (Wealth Pilgrim has a list of several sources where you can acquire your FAKO score for free – here.)
So Why Do You Want a FAKO Score?
A FAKO Score is similar in range to your actual FICO score so by tracking your FAKO score (for free) over time, you can have a sense of what your real FICO score is.
By knowing this information about your credit score, you can:
- Maintain healthy credit
- Have an early warning if your numbers change or drop – there might be significant errors on your credit report
- Have a general sense of your credit worthiness BEFORE you apply for a loan
Be warned though: “FAKO scores don’t always match up to your FICO score so you can’t trust the number alone,” Mulligan says. For more detailed information read the whole article about FAKO Scores on Wealth Pilgrim.
For more information on Credit Scores, here is your bonus reading: Moolanomy‘s Different Types of Credit Scores – coincidentally ALSO written by Kevin Mulligan! This article delves into Enhanced Credit Scores – what they are, what they mean, and how they affect you!