A Few things about Credit Scores you Might Find Interesting

If you have had the opportunity to be part of our Financial Matter Classes you may have heard a great class on credit. I thought I’d provide you some basic information about credit scores.

Let start with FICO:

In 1972, Fair Isaac developed the first automated credit processing system. Wells Fargo was the first to implement it. This development made it possible for companies to extend credit safely and efficiently to as many consumers as possible, which further helped to make the use of credit cards nearly universal. In 1979, the company developed the numerical credit scoring system–FICO–that is commonly used today. While it was not the first automated credit scoring system, it grew rapidly to become the market leader, boosted in the mid-1990s by the endorsement of FICO by Fannie May and Freddie Mac.

Below are the scores and the letter grades associated with them.

FICO Score Range

There is also another scoring system in town. It’s called VantageScore. The nation’s three major credit reporting companies (CRC’s) – Equifax, Experian and TransUnion, all worked together in 2006 to develop a generic credit scoring model that is regularly revalidated. This is the first time the three CRC’s have worked together. Why, you might ask? Well, they pay a license fee to FICO for using their credit scoring model and I imagine that they found it was more cost effective to create their own.

Vantage score has recently come out with its new model 3.0. The range of scores now go from 300 to 850 using a numerical scale that is more commonly accepted – previously the scoring model was 501-990.

Here are a few things you can do to improve your credit score:

• Pay your bills on time

• Apply for credit only when needed

• Keep outstanding balances low

• Reduce total debt

• Build and maintain your credit history

Remember, I love to hear from you so feel free to email me with questions.

Learn to Trade Now