When Was the Credit Score Invented?

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In the United States, a strong credit score can open the door to many financial and professional opportunities. If you have a lower credit score, you may encounter difficulties in accessing essential aspects of society, such as an auto loan, credit card, apartment, mortgage, or a job. While credit scores may seem as American as apple pie, it hasn't always been this way. So, when were credit scores invented? Let's take a closer look.

Key Takeaways

  • The company that would become FICO was started in 1956 by mathematician Earl Isaac and engineer Bill Fair.
  • The Mercantile Agency was founded in 1841 and served as the first commercial credit reporting agency.
  • While there were over 2,000 credit bureaus in the United States in the 1960s, three major credit bureaus dominate the market today.
  • In 1946, John Biggins, a Brooklyn banker working for Flatbush National Bank, introduced the first credit card.
  • The Diner's Club was the first credit card users could use internationally.

When Were Credit Scores Invented?

Credit scores as we know them today started taking shape in the late 1950s and early 1960s. In 1956, mathematician Earl Isaac and engineer Bill Fair teamed up to start Fair, Issac, and Company. The objective of the organization was to create a standardized credit scoring system. Theoretically, their standardized process would eliminate the prejudice in lending practices. Today, Fair, Isaac, and Company is known as FICO.

While the concept was brilliant, as most would agree today, the credit industry initially resisted. According to Yahoo Finance, FICO pitched its idea to 50 large lenders in 1958, but only American Investments adopted the system in 1958. Five years later, the department store Montgomery Ward implemented the system. It wasn't until the early 1970s that credit card providers, auto loan companies, and banks began to utilize the FICO algorithm. These organizations needed a quick, efficient, dependable solution for gauging a borrower's creditworthiness.

Toward the end of the 1970s, many lenders and organizations relied on credit scoring. As it became more prevalent, issues arose around the accuracy of credit reports, paving the way for legislation to protect consumers, such as the Fair Credit Reporting Act (FCRA) of 1970. The FCRA was the first substantial legislation designed to regulate credit bureaus, establishing guidelines for reporting and collecting credit information and offering consumers the right to access and dispute information on their credit reports. However, it wasn't until 1989 that Bill Fair, Earl Isaac, and the FICO team introduced the first FICO credit bureau risk score. Since then, the FICO credit score has continued to evolve and has become the standard for assessing borrower risk.

When Was Credit Reporting Developed?

Modern credit reporting is less than two centuries old. In 1841, the Mercantile Agency was founded and served as the first commercial credit reporting agency. The Mercantile Agency utilized correspondents to gather information about borrowers and lenders across the United States. It functioned much like a modern-day credit reporting agency, but their data was largely subjective, featuring information on an individual's gender, racial background, and moral character.

Who Invented the Credit Score?

Earl Isaac and Bill Fair—founders of Fair, Isaac, and Company—invented the credit score. But before the FICO credit score was a thing, Fair, Isaac, and Company provided scoring algorithms that creditors could use to assess customer data. These algorithms allowed creditors to make more informed lending decisions. However, it wasn't until 1989 when the FICO credit-scoring model was introduced.

Since then, FICO scores have become the most widely used scoring model. FICO scores have also evolved into different models for specific lending purposes:

  1. FICO Auto Score is used by lenders to determine auto loan approval.
  2. FICO Bankcard Score is used by credit card issuers when approving new credit accounts.
  3. UltraFICO Score considers banking information to help people build their credit history.
  4. FICO Score 8 is the most widely used score for everything from mortgages to student loans.
  5. FICO Score 9 includes rental history and unpaid medical bills into the score.
  6. FICO Score 10 is the latest version and considers changes in credit use.

How Were Borrowers Evaluated Prior to Credit Scores?

Prior to credit scores, lenders assessed the creditworthiness of customers based on factors like word-of-mouth, payment history, character, and home visits. Borrowers that needed loans would meet with lenders and attempt to convince them of their creditworthiness. Far too often, lenders would deny loan applications based on the applicant's gender, race, and how they dressed. Afterward, the applicant had little to no alternatives for establishing good credit.

Which Credit Bureau Is Used the Most?

A credit bureau is a company that collects account information from banks, credit issuers, and public records and provides this information to you and authorized parties in the form of a credit report. While there were over 2,000 credit bureaus in the United States in the 1960s, three major credit bureaus dominate the market today:

  1. Experian is the largest credit bureau, maintaining credit information for more than 245 million U.S. credit-active customers in the United States.
  2. Equifax was founded in 1899 and is the second-largest credit bureau. Equifax houses the personally identifiable information for over 240 million U.S. consumers.
  3. TransUnion collects information on more than 1 billion consumers worldwide.

However, no credit bureau is necessarily used more than the other. Banks, credit card companies, and other authorized parties use different credit bureaus for their unique perspectives. For example, if a lender places higher priority on payment history, they may be more likely to use Transunion. This is because TransUnion weighs payment history more than the other two credit bureaus. Nonetheless, all three major credit bureaus are widely respected and used.

Are There Credit Bureaus Other Than the Big Three?

Many other credit reporting agencies exist. However, these credit bureaus are smaller and offer services based on nuanced, specific information. Examples of these more niche credit unions include:

  • Innovis: Innovis provides credit reports to lenders, landlords, and other businesses to help them assess the creditworthiness of consumers.
  • MicroBilt/PRBC: PRBC (Payment Reporting Builds Credit) is a subsidiary of MicroBilt that focuses on providing credit reporting services for individuals who have limited or no traditional credit history. PRBC uses alternative data, such as rent and utility payment history, to help people build credit profiles.
  • CoreLogic Credco: CoreLogic Credco specializes in providing credit information, services, and solutions to mainly automotive and mortgage industries. It offers tools and reports that assist lenders and businesses in evaluating the creditworthiness of individuals applying for auto loans and mortgages.

Who Invented the Credit Card?

Using credit cards has become one of the most efficient payment methods. Over the years, credit card payment methods have evolved from swiping to inserting to the modern-day tap to pay. You can even pay with your credit card through your smartphone via a digital wallet. While it may seem as if credit cards have been around forever, they didn't exist 100 years ago.

In 1946, John Biggins, a Brooklyn banker working for Flatbush National Bank, introduced the first credit card. This invention was a bank card called the "Charg-It Card." As an exclusive initial offering, only local members of Biggins' community received the Charg-It Card. The goal was to increase local customers who patronized his bank. Only customers with accounts at Flatbush National Bank could use the card at participating local stores.

Here's how the original "Charg-It Card" worked:

  1. Customers would present the card to pay for merchandise at local stores.
  2. The customer would receive their goods from the merchant.
  3. The merchant took the sales slips to the bank and deposit them.
  4. The bank reimbursed the merchant and billed the customer at a later date.

Afterward, Ralph Schneider and Frank McNamara introduced the popular Diner's Club card, which required you to pay your balance every month. Nonetheless, charging technology seeds were sowed. Later, Bank of America introduced the BankAmericard—the first credit card with a revolving credit line.

When Was the Credit Card Invented?

Although the Charg-It Card was introduced in 1946, it didn't mark the initial appearance of a credit card. In 1918, Western Union began issuing Metal Money plates to select customers. These plates allowed customers to make purchases and delay payments—like a credit card. However, Western Union's Metal Money plates were limited in where and why they could be used. In the 1920s, hotels and oil companies issued a form of credit card customers could use at company locations. In 1946, the "Charg-It Card" entered the scene. Instead of being a revolving line of credit, the Charg-It Card was a close-loop credit card. A closed-loop card is a payment method only usable at certain vendors or companies.

Diner's Club Card

Fortunately, Frank McNamara forgot his wallet and couldn't pay for his meal at Major's Cabin Grill in New York City in 1949. Instead of washing dishes, McNamara's wife bailed him out and paid the tab. This incident inspired McNamara to launch the first modern credit card: the Diner's Club. The Diner's Club original cardboard cards were issued to select men that could use it in about 28 restaurants. In just two years, membership had skyrocketed to 42,000 customers in the United States. The Diner's Club became the first credit card users could use internationally.

Bank of America

Currently, virtually every large bank and financial institution offers a credit card. But Bank of America was the first bank to throw its card in the ring. The national banking institution issued its card to select California customers in 1958. However, in 1966, Bank of America issued its iconic BankAmericard and became the nation's first credit card that allowed revolving debt. In 1976, the BankAmericard split off from Bank of America, and Visa was formed.


  1. What Countries Use Credit Scores? | CreditRepair.com
  2. FICO History: Founding, Timeline, and Milestones - Zippia
  3. Fair Credit Reporting Act
  4. When Were Credit Scores Invented? A Brief History
  5. The Invention of the Modern Credit Score
  6. When Did Credit Scores Start? A Brief Look at the Long History
  7. Consumer Information Services | Consumer Credit Information | Experian
  8. Your Credit Score's Long History, From Espionage to Algorithms | Time
  9. 30 Years | FICO
  10. Payment History on Credit Reports | Credit Karma
  11. What Is the Largest Credit Bureau in the United States? | Banks.com
  12. The Differences Between the 3 Credit Bureaus | Chase

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