When Did Credit Scores Start? History of Credit Scoring

In this article, we’re answering “When did credit scores start?”

Of course, the answer depends on whether you are referring to business credit scores or personal credit scores.

In this article, we’ll share the answer to both and we’ll also discuss the big shift that took place in 1989 and changed credit scoring forever.

This article is part of our free series on credit products in the United States, including how to get US credit cards for foreigners, which you can access here.

Feel free to use the table of contents to jump ahead to the sections most relevant to you.

Table of Contents

  1. When Did Credit Scores Start?
  2. What Is Credit Scoring?
  3. Where Can I Get My Credit Report?
  4. Frequently Asked Questions
  5. Do You Want Help Opening Bank Accounts?

When Did Credit Scores Start?

Credit scores for individual consumers first started in the 1950s, generated by individual credit bureaus. However, a standardized method for generating a reliable credit score was not introduced until 1989, when FICO introduced the FICO Score.

That said, prior to the 1950s, commercial credit scoring existed. In fact, commercial credit score dates back to the 1800s, when the predecessor to Experian (Retail Credit Company) started collecting data manually from individual merchants about their customers’ credit activity.

What Is Credit Scoring?

Credit scoring refers to the collection of data related to the creditworthiness of individuals and business by credit bureaus. This information is then processed through a standardized algorithm in order to generate a standard credit score, known as the FICO Score. In short, credit scoring helps potential lenders assess the creditworthiness of individuals and businesses that are looking to access credit.

Why Do I Need My Credit Report and Credit Score?

You need your credit report and credit score in order to understand whether you are a qualified applicant for various credit products. For example, a credit card that requires a specific credit score, a mortgage lender that requires a specific credit score, or even a specific interest rate that you want to access that requires a specific credit score.

In other words, your credit score (as shown on your credit report), will impact everything related to accessing credit through financial institutions. That said, it’s important that you do not check your credit score too frequently, as this can negatively impact your credit score as well.

What Does Your Credit Score Start at When You Turn 18?

When you turn 18, you do not automatically have a credit score. In fact, in order to have a credit score you need to have a credit account that is reporting to a credit bureau for a minimum of six months.

With this in mind, if you are 18 and you do not have a credit account, you are considered “credit invisible”. This essentially means that you do not exist in the eyes of credit bureaus because you have nothing reported on you by lenders.

That said, it is possible for 18-year-olds (and young adults) to quickly build up their credit scores using a few key strategies.

First, they can consider being added as an authorized user on a credit card of a family member, which would allow them to absorb the family member’s good credit.

Second, they can obtain a secured credit card and use it responsibly for a period of at least six months before applying for another credit card.

And, they can also ensure that they never exceed more than 30% credit utilization, meaning never spend more than 30% of the credit extended to them.

Where Can I Get My Credit Report?

You can get your credit report directly from credit reporting agencies, any number of financial institutions, or through a range of different online services. Importantly, you can also obtain a free credit report each year through each credit bureau, which is guaranteed by law in the United States.

Credit Bureaus

Credit bureaus refer to companies that specialize in collecting data on individuals (and businesses). These credit bureaus are also referred to as credit reporting (or rating) agencies.

The main services provided by credit bureaus include compiling history from credit accounts and providing credit information to prospective lenders.

This collection is completed by identifying information such as tax identification numbers, addresses, and more.

The three national credit bureaus in the United States are:

  • Experian
  • Equifax
  • TransUnion

Frequently Asked Questions

Below are a few of the most common questions we receive from people looking into when credit scores started. If you have further questions you would like to ask our team, don’t hesitate to get in touch.

What Year Did Credit Scores Start?

Standardized credit scores started in 1989 with the introduction of the FICO Score. However, credit rating agencies existed prior to this point. In fact, commercial credit scores date back to the 1800s when the predecessor to Experian began collecting data from merchants on the credit behavior of their customers.

What Was Used Before Credit Scores?

Before consumer credit scores were used, businesses relied on commercial credit reporting like those provided by Retail Credit Company (RCC), which was founded in 1899. This information was based on the credit behavior of individual clients at merchants through in person collection.

Did Credit Scores Exist Before 1989?

Yes, credit scores existed before 1989. In fact, while the FICO Score was only introduced in 1989, the three major credit agencies were operating before this. In essence, FICO took the information from these independent credit agencies and standardized it in order to generate consistent scoring. Additionally, while retail credit reporting may have only started in the 1900s, business credit rating existed in the 1800s.

Were There Credit Scores in the 70s?

Yes, there were credit scores in the 1970s. In fact, while Retail Credit Company (RCC) only changed its name to Experian in 1975, it had been collecting data and processing consumer credit reports for many years prior. And, in terms of business credit, it had been operational since 1899.

What Was the Original Purpose of the FICO Score?

The original purpose of the FICO Score was to take information from established credit rating agencies and provide an industry standard for comparing reports through a suitable algorithm. This process took place in 1989, at which time all three of the major credit agencies in existence today were already operational, including Equifax (1899), Transunion (1968), and Experian (1980).

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GlobalBanks Team
GlobalBanks Team

The GlobalBanks editorial team comprises a group of subject-matter experts from across the banking world, including former bankers, analysts, investors, and entrepreneurs. All have in-depth knowledge and experience in various aspects of international banking. In particular, they have expertise in banking for foreigners, non-residents, and both foreign and offshore companies.

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