Are Free Credit Scores ‘Fake’ Credit Scores?

In the credit scoring world, two credit scoring platforms dominate the market. FICO is the most commonly used brand of credit score. However, it’s certainly not the only game in town. Between mid-2017 and 2018, over 10.5 billion VantageScore credit scores were used by 2,800 unique users.

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In this article

    You Have Hundreds of Credit Scores

    While FICO and VantageScore are the most visible credit scores in the U.S. lending market, there are many other types of credit scores in use that you’ve probably never heard of.

    All told, when you combine the different credit score brands, different generations, and different varieties, there are hundreds, perhaps even thousands, of credit scores commercially available and in use today.

    What Is a ‘Real’ Credit Score?

    The Equal Credit Opportunity Act (ECOA) states that a credit scoring system must meet certain criteria in order to be used by a lender in the United States. A score must be both “empirically derived” and “statistically and demonstrably sound.” What this means in English is that a scoring system has to be built using generally accepted scientific processes, and it has to actually work.

    Any credit score that a) meets these ECOA requirements, b) is commercially available to lenders, and c) is being used for underwriting and risk assessment is a real credit score.

    The branding of the score is immaterial, so don’t fall for the spin that only certain credit scores are “real’” and all others are fake. That’s simply not true.

    Some scores that are used by lenders are also given to consumers at no cost for educational and credit monitoring purposes. These scores are either available on various websites or disclosed as part of your monthly credit card account statement. These are “free” credit scores, but they’re hardly “fake” credit scores, even using the most unreasonable definition of the word.

    In my mind, the only fake score would be a score that doesn’t meet the ECOA requirements for use in the U.S. Those would not be real scores, because they’d never be used to underwrite your credit applications. They may have some educational value, but they would not meet the legal definition of a credit score.

    Don’t Focus on the Number

    It’s understandable that people get hung up on the numbers and specific brands when it comes to credit scores. However, it’s actually better to focus on the information behind the numbers — the contents of your three credit reports.

    Credit scoring models look at different behaviors from your credit reports to help lenders assess the risk of doing business with you. For example, when your scores are calculated, the following information is considered:

    • The presence or lack of negative information: Do you have any late payments on your credit report? What about defaults, repossessions, collections, or foreclosures? If so, how long ago did they occur, and how often did they occur?
    • Your debt: What percentage of your credit limits are you using on your credit cards? How many accounts do you have with a balance?
    • Credit age: What is the average age of accounts on your credit report?
    • Credit diversity: Do you have a mixture of account types on your credit report, including both revolving and installment debt?
    • Hard inquiries and new credit: How often have you applied for new credit in the last 12 months?

    If you want to earn great credit scores, regardless of the model being used to calculate the actual numbers, you need to master the proper management of your credit accounts.

    Make all of your payments on time, don’t use up a high percentage of your credit card limits, and only apply for credit when you actually need it. If you can do these three things, over and over, you’ll have no choice but to have great credit scores. This is true regardless of the brand of the scoring model your lenders use.

    John Ulzheimer

    Contributing Writer

    John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. The author of four books on the subject, Ulzheimer has been featured thousands of times over the past decade in media outlets including the Wall Street Journal, NBC Nightly News, The Los Angeles Times, CNBC, and countless others. With professional experience at both Equifax and FICO, Ulzheimer is the only credit expert who actually comes from the credit industry. He has been an expert witness in over 230 credit related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit.