Despite the amount of reporting about credit scores and identity theft, there is still a great deal of misinformation being distributed about the process. The modern system of credit scoring was developed in the 1950s by Bill Fair and Earl Isaac, who founded the Fair Isaac Company (FICO) to develop data systems that could be used to improve business decisions. In 1957, Carte Blanche, one of the first credit card companies, hired FICO to design, program, and install its billing system.
Over the years, FICO scoring became the universal standard for judging credit-worthiness. The score is determined by an algorithm - which is kept very secret - that considers and weighs several different factors in determining an individual’s credit score. Among these variables are the total amount of credit available to a consumer and the total amount of credit used, and the ratio between the two. Scores are adversely impacted by the presence of negative information, including delinquent payments, repossessions, bankruptcies, and outstanding judgments.
There are three major credit reporting bureaus in operation today, and credit card companies, banks, landlords, and other enterprises generally rely on one of these three for their credit information. However, some creditors report their own customers’ payment history to only one credit bureau. For consumers, this means it’s important to monitor the activity on each of their three reports, because they’re not identical.