The process of keeping track of consumer spending habits started small and grew into the massive system of credit reporting familiar to people today.
Originally five big credit reporting agencies existed in addition to many smaller credit bureaus. Eventually, only the three big credit reporting agencies remained… Experian, Equifax and TransUnion.
Credit reporting began manually and without electronic data. There were actually phone conversations between the agencies and merchants discussing YOUR credit and anything else including personal information not related to credit.
Also viewing your credit reports and disputing information required a lot of work for consumers including standing in line at a local office to see your manual report.
By 1970, when the Fair Credit Reporting Act was passed, the process changed and more consumer friendly regulations were put in place. In 2003 the Fair and Accurate Credit Transactions Act was passed which meant that every consumer could get a free copy of their credit report annually.
Fair Isaac Corp, the most widely known name in credit scoring got its start about the same time as the credit card. Their idea to create custom credit scoring did not take off in the beginning. However, many businesses would benefit from their product. However, by the late 1980s, Fair Isaac came up with a more efficient system known as the FICO score.
Before the FICO score, lenders could get credit scores from each of the bureaus, but it was up to them to figure out how to put them together to assess a borrower’s creditworthiness. The problem was that not all businesses reported everything to all three bureaus.
Although it’s not a perfect system, continue to improve the services they offer to consumers and businesses.