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Equifax the first of the 3 major credit reporting agencies opened for business in 1899.  In 1958 the Fair, Issac and Company started developing a credit scoring system.  The company was founded in 1956 by engineer Bill Fair and mathematician Earl Isaac, they change their name and become Fair Issac Corporation in 2003.  In 1975 they develop the first behavior scoring system to predict credit risk related to existing customers.  In 1981, “FICO” scores debut.  Something that is such a part of our lives today is just 26 years old!  Today there are many different scoring models, “FICO” scores are just one.  For example the “Vantage” score is one that was recently introduced, but has yet to receive acceptance by lenders and banks. 

Each credit bureau has its own unique score system. However, the scoring models have been normalized so that a numerical score at one bureau is the equivalent of the same numerical score at another. Thus, a score of 700 from Equifax indicates the same creditworthiness as a score of 700 from Trans Union or Experian, even though the calculations used to determine those scores are different at each bureau.  Each bureau does not always have exactly the same information as the others, and you thereby get different scores at each bureau.  It is a common practice to use your middle score as your indicated score when just one number is used.

A credit score is a numerical expression based on a statistical analysis of a person’s credit files, to represent the creditworthiness of that person, which is the likelihood that the person will pay his or her debts.  Companies use credit scores to evaluate the potential risk posed by lending money or doing business with consumers.  While your mortgage lender will certainly look in to your credit scores, did you know when you get a mobile phone or shop for car insurance that they will check your credit score?  Credit scores are calculated based on a combination of a persons payment history, outstanding debt, credit history (or age of accounts), number of inquiries, and types of credit in use.  It does not look at income, job history, residency, marital status, or even the persons age.

When a credit score is generated, a list of the four most significant reasons contributing to that score is created, basically the 4 biggest reasons the score is not “prefect”.  To someone with good credit hearing that “number of established accounts”, or “portion of balances to credit limits is to high on revolving accounts” never seem like good reasons.  The exact weighting of variables and calculations that go into creating a credit score are proprietary information that Fair, Isaac does not release.  

While consumers are able to get a copy of their credit report for free each year at www.annualcreditreport.com, that does not provide them with access to their credit scores.  Credit scores are generally available for a small fee.