There are a number of good reasons the free credit score companies decide to do choose FAKO over FICO. They include the following:
- Cost: The cost of a FICO score is more than a FAKO score, and switching would make their revenue model more difficult to work.
- Purpose: The main purpose for the score isn’t the same for both. Credit Karma and sites like it use the score for educational purposes to teach users how doing different things will affect their credit score, while the FICO score is used by lenders to evaluate the risk in giving a person a loan.
- Adequate: While not the same, it adequately gives the information users want, and there’s debate as to whether or not it’s any less beneficial than a FICO score.
- New: It’s only recently happened that FICO scores have become available at no-cost with the introduction of credit card companies giving them away with the user’s monthly statement.
- Demand: At the moment, there doesn’t seem to be a great demand by users for a switch to be made.
With the free credit score companies having chosen to use FAKO scores, the question becomes, will these free credit score companies ever give their users their FICO score, and what would have to occur in order for that to happen?
Is It Feasible?
The first question to ask is whether or not it’s even feasible for the free credit score companies to offer a FICO score, and still survive. The fact that no Credit Karma clone is offering it, which would instantly differentiate themselves in the market, might very well mean that it’s not possible with the way their revenue model is set up. If it’s ultimately possible, it would mean much smaller profit margins than they are currently able to get.
In order for these sites to make the switch, they would need a compelling reason to do so. One might be users deciding a FICO score is better, and choosing to use websites that offer it over those that don’t. That’s not currently the case, but it could happen if users become more educated about the scores and begin to demand one over another.
It Becomes a Liability
Again, this is currently not the case and it doesn’t appear it will be in the future. If, however, a FAKO score becomes viewed as inferior, it could end up being a liability, which makes it difficult for the companies to maintain their customer base and continue to grow. If this happens, they would be much more likely to consider the switch.
Will It Happen?
Within the current climate, it seems to be a long-shot that any of the no-cost credit score companies will switch over to begin providing a FICO score. There simply isn’t the compelling reason for them to do so at this time, and it doesn’t appear there will be any reason for the foreseeable future. That being said, it’s a dynamic industry with each of the competing companies trying to differentiate themselves from the rest. As competition continues to increase from credit card companies and banks, there may come a time when the switch makes sense. Until then, if you want a free FICO score, you’ll have to get it through a credit card company, rather than from sites like Credit Karma.
(Photo courtesy of Sean MacEntee)