Many people think of credit scores as if they’ve been around forever, helping to govern financial activity. And it is certainly true that lenders have always been interested in the credit history of potential borrowers. You can even find examples of credit reporting going back hundreds of years.
That said, modern credit scores are very new. The FICO score was the first one in the United States, and it didn’t come about until 1989. That’s not even four decades ago, and it’s much more recent than many people realize.
Transforming financial options
Even though they are relatively new, credit scores have had a major impact on the financial options that consumers have in the modern era. Other credit scoring models have come about since 1989, and these are used together to create a range of credit scores based on people’s borrowing history, spending habits, outstanding debt, bankruptcy history and many other such factors.
This score often becomes critical when applying for loans or lines of credit. Some borrowers may have a cutoff where they won’t even give a line of credit to someone whose score is too low. Others may just adjust their rates so that having a higher score means that the loan is relatively cheaper – while borrowers with poor credit have to pay much more over the life of the loan.
What is clear is that these credit scores need to be accurate. Consumers sometimes have issues with inaccurate or even fraudulent reporting, and it can have a huge impact on their lives. They need to know about all of the legal options at their disposal.
