History of Credit Score
Credit scores came into wide use in the 1980s.
Prior to that, human judgment was the only way
to decide who received credit. Lenders would use
their past experience at observing consumer credit
behavior as the basis for judging new consumers.
This proved to be a slow, unreliable process..
Eventually a standardized process was designed,
using a point system that scores the variables
on a person’s credit report. This point
system helped to standardize these variables and
gave a more solid basis to determine whether or
not a customer would make a good credit risk.
When statistical models were built that considered
numerous variables and combinations of variables
credit became even easier to approve. These models
were built using payment information from thousands
of actual consumers, which made scores highly
effective in predicting consumer credit behavior.
When combined with computer applications, scoring
models made the credit granting process extremely
fast, efficient and objective.