Credit Score

First universal FICO credit score invented in 1989

Although FICO’s first universal credit score was invented in 1989, credit reports and industry-specific credit scores existed long before that.

A credit score is a mathematical formula designed to tell a business how likely someone is to repay a loan completely and on time. Companies use them to decide whether someone should be offered a mortgage, credit card, car loan, or other credit product.

Credit scores are often a source of frustration for many social media users, and people complaints on the reliability of this widely used credit reporting system have been shared hundreds of thousands of times.

A recurring statement about credit scores is that the universal credit score used today was not invented until 1989.


Were credit scores as we know them today invented in 1989?



Yes, Fair, Isaac and Company, now known as FICO, created its Universal Credit Score in 1989; the FICO score is used in the majority of loan decisions today. However, more industry-specific credit reports and credit ratings existed before the Universal Credit Score.


Credit bureaus have existed in the United States since the 1800s. These bureaus collected reports on a consumer’s loan history and, until government regulations in the 1970s, included personal information such as state civil, race and sex. Companies began to develop and use scores specific to certain credit industries, such as credit cards, in the mid to late 1900s, but there was no universal score applied uniformly to all industries. loan situations until 1989.

The first universal, personal credit score was created by Fair, Isaac and Company, now known as FICO, in 1989. FICO was unique because its credit score was universal – a score that could be applied to all credit offers, whatever the sector. The FICO score, which ranges between 300 and 850, is used in the vast majority of loan decisions today.

“We launched the FICO Score in 1989 as a universal, unbiased credit risk assessment tool, and in 1991 it became available from the three major U.S. credit reporting agencies,” an employee said. from FICO in a company blog post. “We weren’t the first or only scoring option available at the three major credit bureaus, but we were the first with a common design plan.”

Credit reports, and even industry-specific credit scores, existed long before this, but credit scores were often individualized for certain industries and were based on different criteria from company to company.

Credit bureaus were first established in the mid-1800s to collect information about consumers’ loan histories, though they are often small and locally based, said credit expert John Ulzheimer in an article on One such bureau, founded in Atlanta in 1899 as the Retail Credit Company, later became Equifax, one of the three major credit bureaus today.

But companies often decided whether or not to give a person loans based on subjective character judgments and biases throughout America’s history, even until the late 1900s.

“Early credit reports were not without problems,” Ulzheimer said. “It was often subjective, unfair and did not lend itself to consistent credit decisions. In response to these issues, Congress passed a series of laws designed with consumer protection in mind.

The first of these laws was the Fair Credit Reporting Act of 1970, which required that credit reports be accessible to those to whom they apply, imposed time limits on negative information included in credit reports, and limited who could view a person’s credit report. The second was the Equal Credit Opportunity Act of 1974, which is a civil rights law designed to prevent lenders from discriminating on the basis of race, religion, sex and a host of other personal characteristics unrelated to a person’s loan history. These laws were also intended to limit the information about consumers that credit bureaus could retain.

At that time, the company now called FICO was working on developing automated credit scoring with the goal of reducing or eliminating subjectivity in lending decisions. It built its first credit rating system for the US investment industry in 1958, just two years after its inception. Their early scores were for specific industries or companies, such as scores for credit card lenders on which to base their decisions.

In 1989, FICO constructed the BEACON score for Equifax; Equifax still calls its version of the FICO score BEACON to this day. The three major credit bureaus began using FICO scores in 1991. FICO claims that its scores are used by 90% of major lenders today.

But today’s credit scores are still plagued by many problems that have long existed in credit reports. Although each credit bureau uses the same or very similar formulas, the data they keep in their reports can be different and sometimes inaccurate. Credit scores can also continue to reinforce the biases they were meant to eliminate.

“A FICO score is probably a more unbiased way to manage credit approval than simply asking a bank representative to pass cursory judgment on potential applicants,” said the editors of the Money Management Education Blog. OppU. “But algorithms can actually reinforce racial disparities that already exist.”

Those without a credit score, estimated at 45 million Americans, tend to be low-income, younger and from minorities, the US Government Accountability Office said in January 2022. This led the Consumer Financial Protection Bureau to explore a more generalized inclusion of alternative data. , such as rent and utility payments, in credit reports.

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