FICO Credit Score History

Ethel Gonzales

Do you know Fair Isaac? The Fair Isaac Company is the creator of the FICO score: that little three digit number that controls your ability to get a decent rate on your credit cards, mortgage loan, or car loan. It also impacts your ability to get car insurance, home insurance, and even to get a job. How can that be?

The Fair Isaac Company was founded in 1956 to provide data to help businesses make smarter decisions. In 1995 Fannie Mae and Freddie Mac gave the FICO score an important credibility boost when they recommended that lenders use the FICO score to qualify mortgage loan applicants. Imagine having no idea why your loan was disapproved except that something called a FICO score was not good enough. It was not until recently that the Fair Isaac Company was even willing to share the major categories that they use to calculate your score. The exact formula that is used to calculate your credit score is still a closely guarded secret. However, thanks to Internet lenders who in early 2000 published some of the FICO guidelines in response to public outcry over the secrecy, Congress finally made it a law that people should have access to their scores.

Over 65% of lenders now use the FICO scores to make sure that they will be able to get back the money that they lend. If it is even slightly possible that you will pay late or default on your loan those lenders will raise your interest rates or even deny you credit. In the next series of articles I will cover the five factors that affect your credit score: Payment History, Amounts Owed, Length of Credit History, New Credit, and Types of Credit.

© 2008 by Dragon Bear Inc. All Rights Reserved.

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