Credit score comparisons

Posted by Mords1944 on May 9th, 2020

Credit rating seems to be a simple concept. However, all the financial information provided to consumers is confusing. You can see multiple scores and various criteria used by banks, credit card companies, and other lenders. What is your actual credit score? Read on for an overview of credit scores and what they mean to the general population.

All scoring methods generally use statistics and analysis to determine consumer credit payments over time. All of them are used by lenders and financial institutions to facilitate the granting of credit, loans and mortgages to individuals. Payment history, general debt, number of cards, and other information are used in most scoring models.

The History of Credit Scores

Until the 1970s, credit rating systems were not the prescribed way to determine credit viability. Financial institutions used human metrics, such as a personal relationship with the client, body language, and initial conversations. Financiers often shared information across the industry when they had mutual clients. The results were often misleading, and financial institutions themselves suffered losses associated with unreliable consumers.

Equifax, now a large credit agency 3, paved the way for future credit information gathering as the first company to operate with the goal of collecting consumer data. TransUnion followed Equifax in the 1960s. Data collection in the 1960s included irrelevant information about personal habits, vices, and opinions. The level of misinformation and mistrust of the general population led to the passing of the Fair Credit Reporting Act in 1970, which regulates the collection of data and the circulation of consumer credit information.

FICO (Fair Isaac Corporation) is known as the universal method of credit rating. All three major credit bureaus in the United States use FICO scores on their credit report documents. More than 80 countries around the world also use FICO information to improve business processes. FICO helps consumers manage credit health worldwide through its analysis and reporting information.

The company was founded in 1956 and now 95% of the largest financial institutions in the United States use FICO information on a day-to-day basis. One hundred billion FICO credit scores have been sold since the company began scoring.

FICO began sharing credit information with companies in the late 1950s when the company started. In 1987, FICO individual scores became more available to loan professionals. It was not until 2003, with the passage of the Fair and Accurate Credit Transactions Act, that credit information was made available to consumers once a year.

VantageScore started in 2006 as a collaboration between the three major Credit Builder review reporting bureaus. Experian, TransUnion and Equifax developed VantageScore to improve their data analysis techniques. The company focuses on providing accurate consumer information in the context of relevant economic data. They are dedicated to finding a solution and standardizing certain sets of consumer data across all three offices.