Like it or not, they're here to stay. It seems that nearly every aspect of our lives is now in some manner determined by that three digit number; the credit score.
I am the kind of person that finds comfort in understanding the origination of things. In this case, the History of the Credit Score. So, let's learn a bit about it. It may help us deal with the control it has over us.
Credit Scores really didn't come into play until the 80's. The scoring model that Fair Issac presented was created in the 50's. William Fair, an engineer and Earl Isaac, a mathematician created 'FICO' then and began to create an equation, or algorithm to help lenders get a better idea of the risk associated with lending money to individuals. So, the 'idea' of credit scores have been around for well over 50 years. However, it wasn't until 1989 that Fair Issac company debuted their scoring model. It was then adopted by Freddie Mac and Fannie Mae in 1995 as 'a numerical assessment of risk'.
So, flash forward to now. And more importantly, why? The 'why' is a double edged sword. See, back in the day, folks could go down to their local bank, talk to the banker (cue Jimmy Stewart) and ask for money based on the relationship you had wit the lender. It is, or was a more 'personal' transaction. Sounds good right? Well, yes, and no. What if the lender didn't like you? Or what if the lender was discriminating against you? See it works both ways.
Additionally, and probably the real reason, is that.. Most lenders really don't know how to read a credit report. So, the scoring model was designed to streamline the process and standardize the lending practice.
If not, call us, we can fill in the gaps.
Next topic, the bureaus...
Ed-Jack Dvorak is National Affiliate Liaison at Credit Dr., a national credit restoration company. He works with clients and creditors to improve credit profiles.