Introduction
The subject of credit scoring has become an increasingly hot topic, and for good reason. For many years, the general public only associated the concept of credit scoring with the need to purchase high-ticket items such as a new car or a home. Today, credit scoring goes much further. Your credit score can affect your ability to get a good rate on commodities such as car insurance, cell phones, or even determine whether or not you get the job or promotion that you want and deserve. Indeed, the financial snapshot provided by the credit score has also become a gauge for many employers, especially those who seek to place employees in a position of management or financial responsibility.
The
History of Credit Scoring
The credit score system used today has evolved since the 1950s. It was originally designed to provide lenders with financial profiles on consumers who wished to borrow money. The lenders' biggest concern was whether or not an individual had the ability to repay a loan, and establish what percentage of risk might be involved. Congress passed the Fa
ir
Credit Reporting Act in
1971 to establish guidelines for fair practices in regard to the use of
credit scoring. This law was designed to promote accuracy in reporting
and protect the privacy of consumers. In light of the increased use of
credit scoring and a growing fear of identity theft, recent legislation
has been passed to further protect Americans and improve consumer
awareness. The Fair and Accurate Credit Transactions Act of 2003
(sometimes referred to as The FACT ACT or FACTA) was signed by
President George W. Bush on December 4, 2003. This amended the Fair
Credit Reporting Act, enabling each American to obtain one free credit
report every 12 months from each of the three main credit reporting
agencies (CRAs); Equifax,
Experian® and
TransUnion®.
Those bureaus have created a central web site, www.annualcreditreport.com,
to accommodate Americans who wish to obtain copies of their credit
report. Your Credit Score - What It Means to You as a Prospective Home Buyer
Part I - The History of Credit Scoring
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