Many people ask, “When did credit scores start?” The invention of credit scores changed the way lending money is done, so it must have started at some point. The history of credit scoring from 19th-century ledgers to the current FICO algorithms is discussed in this guide.
Introduction: History of Credit Assessment
The idea behind the measurement of creditworthiness appears recent, although the history goes back more than most borrowers can imagine. The three-digit credit scores used today can be seen as the result of centuries of financial innovation, which turned lending practice from subjective personal status to collecting and analyzing data. The initial numerical credit scoring systems came to replace the earlier non-numeric systems in the mid-20th century, although the basis was laid decades earlier by the merchant credit ledgers, the early credit bureaux, and the financial reforms brought on by the Depression.
This has been traced in this complete guide:
- Puritan days: merchant credit in the 1800s
- Birth of credit bureaus (19th century)
- First mathematical scoring models (1940s-1950s)
- A genius system created by FICO (1989)
- Advancement in scoring in modern times
1. The Pre-Score Period 1800s Credit Assessment
Personal relationships and handwritten records were the only options taken before numerical scores to file a credit decision. Smaller traders kept customer accounts of their payment, which were like credit reports in the modern format, but by use of paper records, so-called credit ledgers. The major problem with these early systems was that:
- Hyper-local: No town interchange of information.
- Subjective: Merchant opinion-based.
- Discriminatory: The racial/gender bias was echoed in it.
- Unverifiable: No standard procedure of validation
The Industrial Revolution brought about the demand for more complex systems because population mobility was becoming high, and lending was no longer the local communities.
2. Late 1800s Birth of Credit Bureaus (Late 1800s)
The initial credit reporting organizations appeared to circumvent the use of store-specific ledgers:
- 1841: The Mercantile Agency (later R.G. Dun & Co.) was established in New York to gather countrywide payment information through the use of correspondents.
- 1864: The Retail Credit Company (which became Equifax) was founded in Atlanta, extending bureau coverage
These preliminary bureaus:
- Employed detectives to check reputations
- Established common reporting systems
- Formulated uniform formats of reports
- Subjective character judgments continued to be used
3. Appearing is Mathematical Credit Scoring (1940s-1950s)
The earliest credit scoring systems were the result of a statistical study of lending practices:
- 1941: Repayment factors predictive in consumer installment financing were identified by Durand in an article titled Risk Elements in Consumer Installment Financing
- 1956: Engineers Bill Fair and mathematician Earl Isaac founded the Fair Isaac Company (later FICO)
- 1958: First automated credit scoring at American Investment Corporation
These pre-war models:
- Weighted factors of 10-20 had been utilized
- Enforced mainframe computers
- Specializing in types of loans
- Prepared the conditions for modern scoring
4. The FICO Revolution(1989-Present)
A breakthrough happened when Fair Isaac released the first general-purpose credit score:
- FICO Score was created at Equifax (1989)
- In 1991, TransUnion and Experian implemented FICO
- 1995: FICO regains its industry standard in the mortgage industry
Key innovations:
- Standardized 300-850 spectrum
- Predictive behavioural modeling
- Unending updates in the algorithm
- Market penetration by lenders, Bullock, A. (2006).
5. Modern Credit Scoring (2000s- Today)
developments have been recent:
- FICO alternative, VantageScore (2006)
- The banking data inclusion in ultraFICO (2018)
- Time-trended data (2019), looking at time trends
- Solutions to thin-file consumers’ credit invisibles
Credit Score Start (FAQs)
Q: What were credit scores used for before?
A: Judgment by only local business records and departmental reports
Q: What time did FICO materialize?
A: was widely adopted from 1989 to 1995
Q: Were there credit ratings in 1970?
A: Yes, though, only those that are custom-made against particular lenders
Q: At what point did the free credit scores enter the picture?
A: Free access came on a large scale in 2010, approximately.
Q: What is the oldest credit bureau?
A: R.G. Dun & Co. (1841) merged into Dun and Bradstreet
Conclusion: Ledgers Through Algorithms
Credit scoring development is one of the largest financial revolutions of recent history, and its development has completely altered the borrowing process. The gradual democratization of credit evaluation has gone through demanding steps from subjective estimates accepted by the merchants of the 19th century to a refined algorithmic model currently in use. It became the turning point in the history of the ICO score in 1989, when the 300-850 scoring range became the industry standard, the universal language of creditworthiness.
Although these standard systems avoid most of the bias involved in personal assessment, they introduce different issues regarding transparency and the inclusion of financesBest Investment Tips for 2025 – Financial Growth Guide. However, today, thousands of items go through checking the more sophisticated credit scoring models that make predictions on repayment behavior far more accurate than ever before.
Final Thoughts
When did credit scores start? Nevertheless, they are not exempt from criticism, since it is seen that they may aid in advancing inequalities. They also establish obstacles to credit-invisible people. The third wave of credit profile is already coming, using alternative information such as rental payments, utility bills, and even the school of education to provide a more comprehensive monetary image. Improved AI and machine learning technology hold further promises of making scoring more accurate as well as making credit more accessible.
As a consumer, it is vital to be aware of this history – this is what makes some financial behavior improve your scores and others deteriorate, and it emphasizes the fact that good credit practices are of the essence. As we find our way forward, the credit scoring system should maintain a balance between innovation and fairness, ensuring that technological progress does not undermine consumer protection.
This continuing transition explains the way that trust in money is present today in a digital world. Here, even credit scores are now determining much more than who receives loans or not. They can tell employers exactly who you should hire, or not, and which houses should be awarded.
