Houstonians and Texans alike have long been confused with credit scores, their meaning and overall composition.
The important thing to remember is that FICO (Fair Issac Corporation) scores are much more telling than any other scores available. Lenders, mortgage brokers and other credit institutions have long used FICO scores as the standard means of determining credit-worthiness. FICO's credit score model is a composite of factors such as payment history, credit utilization, length of credit history, types of credit and inquiries. The lower the FICO score, the higher the credit risk the consumer may be. FICO scores are the most used and trusted means of determining a consumer's credit worthiness.
However, this has not stopped other companies from developing their own schematics in terms of determining credit scores. In fact, the three major credit reporting agencies (Equifax, Experian and TransUnion) developed their own model to determine credit risk in order to cut into Fair Issac's market share. Up to this point, these efforts have not changed much in the minds of people in the credit business, as FICO scores are still the standard means of assessing credit risk.
The real dilemma is with the average consumer and their overall knowledge of types of scores, credit worthiness and overall credit risk. Many consumers receive scores from free websites or perhaps directly from the credit bureaus, which they believe are their true FICO credit scores. Unfortunately, this is not true, and can be very misleading in determining credit worthiness. In many instances, these FAKE-O scores may be inflated 40 points or more over traditional FICO scores. FICO scores can only be received from Fair Issac directly or from a lender that has pulled a consumer's credit report for the purpose of granting credit.
So, look for FICO rather than FAKE-O.
