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Regular Contributor
ChuckG
Posts: 156
Registered: ‎02-21-2008
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Why do FAKOs exist at all?

I apologize if this has been answered elsewhere, I can't find it. When I search for "Why FAKO?" all I get are threads comparing fakos to ficos etc.

 

But what I want to know, is what good does it do the CRA's to provide fako scores at all? Especially Experian. If the information is available to lenders why shouldn't this information be available to consumers? They can charge practically whatever they want for it, people will pay it. Just doesn't make sense to me from a business persepective. Who benefits? Anyone have some more insight on this?

 

Thanks, just curious.


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RobertEG
Posts: 18,558
Registered: ‎03-19-2007
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Re: Why do FAKOs exist at all?

It's called capitalism.

Regular Contributor
ChuckG
Posts: 156
Registered: ‎02-21-2008
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Re: Why do FAKOs exist at all?

I don't think capitalism is necessarily a bad thing, but I don't see how the CRAs can make more money with FAKOs than they could make with the real thing?


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92235
Posts: 140
Registered: ‎03-30-2010
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Re: Why do FAKOs exist at all?

Why does the TU score on here exist? It is as much a FAKO as CreditKarma.

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llecs
Posts: 32,869
Registered: ‎08-04-2007
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Re: Why do FAKOs exist at all?


ChuckG wrote:

I don't think capitalism is necessarily a bad thing, but I don't see how the CRAs can make more money with FAKOs than they could make with the real thing?


But they do make more $$$. Since they created the score, they don't have to fork out the $$$ to FICO and they can get away with charging the same price while pocketing more. The term "credit score" is ubiquitous. People want a credit score, and little do they know the difference between a FAKO and a FICO (except us). So when they buy a FAKO, they are thinking they do have a FICO. The CRAs and CMSs capitalize on that and they walk away with more $$$ in their pockets.

 

 

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llecs
Posts: 32,869
Registered: ‎08-04-2007
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Re: Why do FAKOs exist at all?


92235 wrote:

Why does the TU score on here exist? It is as much a FAKO as CreditKarma.


As of last year, and maybe still applies, but millions of TU98 were pulled according to FICO. It just pales in comparison to TU04. Some lenders still use it including mortgage lenders. However, the odds are small you'd ever run into a mortgage lender that uses it....kinda like TU08. Nobody uses that either, or at least not as much as TU98 I bet. 

 

I know that TU04 isn't offered because TU doesn't want to play. IMO, having TU98 is better than nothing. You certainly can't guesstimate TU04 using a Vantage, TransRisk, PLUS, or whatever FAKO flavor suits your fancy. 

 

 

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Shogun
Posts: 12,952
Registered: ‎04-15-2011
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Re: Why do FAKOs exist at all?

Sure it's a way to make revenue.  That's why you see all the advertisements for it.  As far as the FAKOs go, most lenders use FICO scores.  Which means whoever pulls the score must pay Fair Isaac a fee for using their algorithm in compiling the score.  If they can just make one without paying Fair Isaac the fee they stand to make more money.  The score they give isn't going to be used by any lenders, but that part isn't advertised.


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dabrian
Posts: 362
Registered: ‎12-10-2012
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Re: Why do FAKOs exist at all?

$$$
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Revelate
Posts: 9,765
Registered: ‎12-30-2011
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Re: Why do FAKOs exist at all?


llecs wrote:

92235 wrote:

Why does the TU score on here exist? It is as much a FAKO as CreditKarma.


As of last year, and maybe still applies, but millions of TU98 were pulled according to FICO. It just pales in comparison to TU04. Some lenders still use it including mortgage lenders. However, the odds are small you'd ever run into a mortgage lender that uses it....kinda like TU08. Nobody uses that either, or at least not as much as TU98 I bet. 

 

I know that TU04 isn't offered because TU doesn't want to play. IMO, having TU98 is better than nothing. You certainly can't guesstimate TU04 using a Vantage, TransRisk, PLUS, or whatever FAKO flavor suits your fancy. 

 

 


illecs: has there any been any confirmation of TU98 (or 08) being used for a mortgage application for anything other than jumbo loans?  I know the GSE's will not accept a loan underwritten by TU98, and that's the lion's share of the mortgage market these days, and I don't know any primary lender keeping conventional mortgages on their books... any score congruence between '98 and the mortgage scores is likely as much coincidence as a FAKO's being similar unless the market has changed substantially in the past year (which may have occurred I'll admit, haven't been tracking mortgages closely).

 

I suppose possibly that it may be pulled as a secondary score in the GSE case?

 

 

 

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AndySoCal
Posts: 1,952
Registered: ‎04-07-2009
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Re: Why do FAKOs exist at all?

All scores are valid. The use and why the score is used varies.  Some scores evaluate risk some are customized ot a particular industry. The FICO scores are predictive score. The score evaluates the credit history looking for various characteristics. IE level indebtedness, payment history, both good and bad etc  Why FICO is so popular among lenders is it accuracy. A consumer with a high FICO score tend to carry a lower risk of not repaying the a debt than a consumer with a low FICO score.

 

Here is a link on scores and consumers done recently by the goverment.

 

http://files.consumerfinance.gov/f/201209_Analysis_Differences_Consumer_Credit.pdf

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