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History of Credit Scores: Brief Synopsis

  • The first generic FICO scoring model was created by Fair Isaac and Equifax in 1989
  • A new version of the FICO score model is released every few years

History of Credit Scores: Full Explanation

In 1956, Bill Fair and Earl Isaac found a company called Fair Isaac. Fair Isaac changed its name to FICO in 2009. The main purpose of the Fair Isaac Company was to determine who was a good credit risk for car loans. Over the years, the FICO score has evolved with the determining factors, for assessing an individual for good credit risk for cars, homes, credit cards, personal loans, employment, etc.


In 1989, Equifax and Fair Isaac created the first generic scoring model. Prior to this, all models were custom designed just for the use of companies that wanted a scoring model. The generic version was the first to be used by vastly different types of companies. This is truly the “birth” of the generic FICO model used today and an important chapter in the history of credit scores.


It was not until 1995, when Fannie Mae and Freddie Mac recommended the use of FICO scores for evaluating US mortgage loans that FICO gained national recognition. Since that time, FICO has dominated the credit scoring market. In fact, no mortgage lender in the country uses a score other than the FICO score in order to determine mortgage eligibility (talk about a monopoly).


Every few years, FICO revises their FICO algorithm and releases a new FICO Score model, each one touted as an improvement over its predecessors. The latest version of FICO which was first introduced to the public in February 2009 is called FICO 09. So what do the three major credit bureaus call their FICO scores as? Here is the list:


Equifax:

  • Beacon
  • E-Beacon
  • Beacon 96
  • Beacon 5.0
  • Beacon 09 (FICO 09)

Trans Union:

  • Empirica
  • New Empirica
  • FICO Risk Score Classic
  • FICO Risk Score Classic (FICO 09)

Experian:

  • TRW/Fair Isaac Score
  • Experian/Fair Isaac Score V2
  • Experian/Fair Isaac Score V3
  • Experian/Fair Isaac Score V4 (FICO 09)