What exactly is a credit score? How does it actually work? A credit score is a rating given based on a person’s unique borrowing history (or credit report) that can be accessed by banks and other lenders to help them decide whether or not you’re an appropriate candidate for a mortgage or loan. Lenders look to see if you can repay your loan in regular monthly repayments based on your past experience with money management. They usually look at things like your history with loans, the number of credit cards you have under your name, and whether you’ve taken too long to make repayment…or missed them altogether.

How does the credit score work?  

There are hundreds of credit score facilitators out there, between the more common companies like Experian and Equifax and the private financial brokers, you as the consumer have a variety to choose from. Both Experian and Equifax use their own algorithms to calculate your credit score but the numbers they use relate closely with the FICO score; which is the most common method of valuing people’s financial viability.

So, what does the ‘FICO score’ analyze? It comprises info on a person’s financials that can be found in public forums. It also takes into account the use of your credit card as well as your credit report. The credit report is made up of three main parts:

  1. Your personal information
  2. An analysis of your loans, credit cards, and current account statements
  3. Your payment history.

What’s a ‘free’ credit score?

Most credit scores are provided as a free service. Interestingly, it’s only relatively recently that consumers have been able to access evaluations of their financial state. Historically, it was was only lenders who were made privy to this kind of info. In 2011, a few companies began offering this as a free service (due to increasing demands for consumer credit scores). Then it wasn’t long before other companies followed suit and began providing the same free credit ratings as their competitors. Fast forward to today and free credit scores are commonplace.

What makes a credit score ‘real’?

So, what makes a credit score ‘real’ or ‘fake’? If a credit score boasts all three of the following characteristics, then it’s a legitimate rating and can be used. The first feature is that it can be accessed by lenders commercially to offer you a loan, mortgage, or another form of financial contract.

The second attribute is that you’re able to use the credit score during the risk assessment process for being vetted by a company or lender for a loan or underwriting. This usually happens when a company or lender has to cover themselves for insurance purposes.

The final feature of a ‘real’ credit score is that it shows qualities sticking to the ECOP or the Equal Credit Opportunity Act (1974). This was a bill passed by Congress to stop the practice of discriminatory lending. This makes it illegal for any lender to deny either a loan or a mortgage to anyone based on their race, religion, gender, nationality, or marital status.

Are free credit scores ‘fake’ credit scores’? 

Coming back around to the initial question. Are free credit scores ‘fake’ credit scores’?  The answer would seem to be, not necessarily. Free credit scores are standard in today’s society and can be accessed by anyone. It’s good to research how the potential credit score is calculated as well as the authenticity of the company issuing it, but if the company shows signs of using all three of the features discussed above, then it’s likely to be a legitimate credit score.