The history of the fico score goes clear back to 1956. It was first founded by the Fair Isaac Company, who tried to come up with a better way for businesses to make decisions. The FICO score has come a long way since then. In today’s world, if you don’t have a high FICO score then it can be a challenge to get a house loan, a car loan, a good credit card rate, insurance, and it can even affect whether you get hired at a job or not.
How they calculated the FICO score, up until about the year 2000, was a “big secret.” The Fair Isaac Company wouldn’t share with anyone the formula they used to determine the FICO score. It wasn’t until people seriously protested this secrecy that they finally shared some of the guidelines they use to produce the FICO score. It soon became a law that people should have an admission to know what their scores are.
Nowadays, a good FICO score is an essential thing to have to prevent you from your credit being denied or to keep your interest rates from rising. A very high percentage—higher than 65% —of lenders (such as banks and credit card companies) relies on the FICO score to help them make decisions. It gives them a sound way of telling if someone has the ability to pay back the money being lent to them. It assists them in knowing the risks that are involved if they led to a certain person. Not only do lenders use the FICO score, but also insurance companies, employers, landlords, phone companies, and even the government.
Before the FICO score existed (before 1980), people in business would have to rely on instinct or prejudice to help them determine who to lend to. The FICO score helped take out discriminatory practices that people used. Sometimes—especially when it was first used—there were those who claimed it still had its flaws that involved age, gender, race, or zip code discrimination. It has improved a ton since then, especially since it was required by law for people to see how their score was made up.
Things that can affect your credit score, as people came to find out, is the length of credit history, new credit, payment history, amounts that are owed, and even the types of credit. The score is a statistical analysis of the credit reports of a person that come from credit bureaus (such as Experian, Equifax, and TransUnion), and is expressed in a numerical expression (a three digit number).
The Credit Score is not based on the income someone makes, but rather their ability to pay their bills on time (along with many other such factors). There are many different ways to obtain your own credit score. A score ranges from 300-850.
The history of the FICO score has come a long ways since it was first used. It has become a more reliable way for lenders, employers, and other companies to assist with helping them in decisions. Where it used to be a big secret on how the FICO score was calculated, it is now available for anyone to see and know how their score is designed. Having a high FICO score is extremely important to qualify for almost anything nowadays.