When did credit scores start? A brief history

The concept of credit has been around for a long time. Even credit reporting has been around since the 1800s. But credit scores? They were introduced much more recently.

Keep reading to learn more about the history of credit scores and how they’ve evolved over time. 

Key takeaways

• The first U.S. credit score, the FICO® score, was introduced in 1989.
• Credit scores were invented to make the process of evaluating credit faster and more equitable.
• A credit report lists your personal information and history. Credit scores are calculated using the information in your credit report.
• Today, most lenders use your credit scores to determine creditworthiness.

The Fair Isaac Corporation, which now goes by FICO, invented the first consumer credit score in 1989. The Consumer Financial Protection Bureau says that “most lenders still use FICO scores when deciding whether to offer you a loan or credit card, and in setting the rate and terms.”

Other credit-scoring models followed. But only VantageScore®—created by the three major credit bureaus, Equifax®, Experian® and TransUnion® in 2006—has gained similar acceptance. While both models use a three-digit number to evaluate a person’s creditworthiness, they use slightly different methods to generate scores.

The first credit score was introduced in 1989, but the concept of evaluating a company or individual’s creditworthiness—or ability to repay a line of credit—has been around longer.

Attempts to standardize this process began as far back as 1841. But despite advancements in the collection of consumer data, credit reviewing continued to be a time-consuming, manual process. And it was subject to racial, gender and class bias.

Credit-scoring systems were invented to help make the process easier for both lenders and borrowers. By creating a standard for assessing borrowers’ credit histories, FICO hoped to eliminate those biases and make credit reviews more objective and efficient.

While credit reports and credit scores both give an idea of a borrower’s credit risk, they’re not the same. A credit report can list your personal information, credit account information, hard inquiries and public records like bankruptcies or liens. Credit bureaus compile credit reports.

Credit-scoring companies—like FICO and VantageScore—use information from your credit reports to calculate your credit scores. Since there are multiple credit-scoring models, you probably have more than one credit score. These scores are used by lenders to make lending decisions.

More than 30 years after it was created, FICO says its scores are the most widely used. FICO scores have evolved into several models for specific lending purposes.

Here are a few of the FICO score models used today:

• FICO Auto Score: Used by lenders when approving auto loans.
• FICO Bankcard Score: Used by many credit card issuers when approving new credit accounts.
• UltraFICO Score: Factors banking activity into the score to help those who are still building their credit history.
• FICO Score 8: The most widely used FICO score by lenders for everything from student loans to mortgages.
• Fico Score 9: Factors unpaid medical bills less and rental history more into the score.
• Fico Score 10: The most recently updated version, this score considers changes in consumer credit use—like an increase in personal loans used for debt consolidation. FICO Score 10 T also factors in trended data.

VantageScore is increasingly being used, most often by banks and credit card issuers. And like FICO, VantageScore has released updated versions of its scores:

• VantageScore 1.0: It uses scores ranging from 501 to 990 and calls itself the first true tri-bureau credit scoring model.
• VantageScore 2.0: Following the 2008 recession, this version considered consumer behavior both before and after the recession.
• VantageScore 3.0: It updated the scoring scale to 300-850 and made it possible to score more borrowers with thin credit files.
• VantageScore 4.0: This is the first model to factor in a consumer’s credit behavior over time using trended data. Auto, credit card, personal loan and banking lenders may use this version—sometimes in addition to other credit-scoring models.

As credit-scoring models have improved with time, so has legislation designed to help protect borrowers’ credit information.

The Fair Credit Reporting Act (FCRA) and the Equal Credit Opportunity Act (ECOA) are two such laws. The FCRA helps keep information within credit reports accurate, fair and private. And the ECOA helps protect borrowers from discrimination by lenders.

Modern credit-scoring models give lenders a fast and easy way to determine an applicant’s risk level for a loan. They also help keep lending practices fair by ensuring these decisions are based on factors like payment history and length of credit history and not on personal factors like age and marital status.

CreditWise from Capital One lets you check your credit scores regularly and for free. It won’t hurt your score, and it’s available to everyone—even if you’re not a Capital One customer. You can also get free copies of your credit reports every year from each of the major credit bureaus at AnnualCreditReport.com for a full analysis of your credit history.