General Understanding of FICO and the CRAs

[Anonymous]

I have some real rookie questions,

Is FICO the company that develops the scoring models for the CRAs? Is Equifax the only CRA that uses FICO scoring models? Does TU and Experian use their own internal scoring models? Is Beacon synonymous with Equifax?

Thanks in advance for your help in understanding

[Anonymous]

Fair Isaac is the company that created FICO in conjunction with each of the three CRA's. Beacon is indeed the EQ version, they are currently on 5.0, but there are FICO formulas for Experian and TU as well. With Experian it is also known as the Advanced Risk Model 2.0  and 3.0 and TU has its own name, which I believe is Empirica (98 version) and Classi version 2004.

[haulingthescoreup]

Hi, welcome to the forums!

Start with these:

Credit Scoring 101 (first post, at least)

Understanding Your FICO Score" --this is worth printing out and keeping handy while you read.

FICO develops the scoring algorithms for the CRA's. Equifax sells your EQ FICO from its website: TU and EX sell their home-grown variety, having found that many people are fooled into believing that they're the scores that lenders use. They're not.


eta: DIG beat me!

Message Edited by haulingthescoreup on 12-24-2008 12:28 PM

[Anonymous]

Thanks so much. When you say home grown variety do you mean TU and Experian are not selling a true FICO? It is not derived from Fair Issac? 

[Anonymous]

So even though there are formulas created by FICO for TU and Experian, Why does Equifax seem to more closely mirror my true FICO?

Thank you

[haulingthescoreup]

Because EQ sells the EQ FICO score from its site. It is the true EQ FICO score.

You'll see EQ FAKO's out there, too, from 3-in-1 credit monitoring services, etc. I'm talking about when you buy your EQ score from the EQ website.

[Anonymous]

Thanks,

For the explanation. Makes perfect sense

[MidnightVoice]

FAKOs are pretty random.  Sometimes ione is similar to your score, sometime another, sometimes none

[RobertEG]

It is all perplexing to the consumer.  While the FCRA goes to great length to regulate credit reporting, the scoring of credit reports is essentially unregulated. 
The CRAs are the repositories of the data for any credit scoring.  All three CRAs license software from FairIsaac to generate a credit score, and only those licensed scores using the FairIsaac software may be called, or sold, as FICO(R) scores. 

But the CRAs are also in the business of making money, not only by offering credit reports, but also credit scores.  They are both in bed with and in competition with FairIsaac.  They have developed their own scoring algorithms that they freely market, but they cannot call them FICO scores.  Most on this site refer to them as FAKOs, meaning that they are not based on the licensed FICO algorithm.

The consumer question is not which one is better.  The question, rather,. is which scores do lendors use in their credit decisions.

I dont think there is much dispute that most lendors use FICO scores, so that is what most consumers should pay attention to.

Message Edited by RobertEG on 12-27-2008 10:05 PM