The History of Credit Scores Prior to the creation of standardized credit scores, lenders and loan officers would often develop their own score card to assess the risk of lending to a particular borrower. This score card was based solely on ones credit report and could vary drastically from one lender to the next. The major issue with this original method was that it was based on a loan officers ability to judge risk, rather than a common set of rules and specific calculations. So, in the 1970s, the Fair Isaacs Company set up the first credit scoring system in order to help remove the inherent inconsistencies that arose from having each lender perform their own credit diagnostics. It has since become known as the FICO score and the algorithm has been widely adopted by Americas largest credit reporting agencies. Why Would My Score Differ Between Credit Agencies? The three major credit bureaus are Equifax, Experian, and TransUnion. Simply put, the reason that the scores you receive may differ is that each score is dependent on the credit report that each receives and the scoring model they use. In other words, Equifax might have not exactly the same information on you as Experian and vice versa. One credit bureau may be missing an account that either helps or hinders your score and will therefore report a different credit score than another credit bureau. If the system was perfect, this wouldnt happen. But since it isnt, you want to make sure that they all have the proper information by checking your three free credit reports every year at AnnualCreditReport.
Posted on: Thu, 17 Apr 2014 13:18:08 +0000
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