Page 7 - EQ Magazine Issue #3
P. 7
CREDIT RESOURCE
A History of Credit
Source: John Ulzheimer
redit bureau based risk scoring systems, their replaced by actual ECOA compliant, commercially
formal title, have been commercially available available scores, the same ones that lenders can use.
Csince the late 1980s. They were initially used by
credit card issuers but were quickly adopted by other Free Credit Scores
types of lenders. The last holdout was the mortgage Roughly 11 years ago, in 2008, the credit score
lending environment, but that too changed. In the mid- began to evolve yet again. This time credit scores
1990s, Fannie Mae and Freddie Mac informed mortgage began to change into a free give-away to consumers
brokers and lenders that they would have to begin who were willing to become a registered user of
using credit scores as part of the mortgage decision- certain websites. Credit Karma, CreditSesame, and
making process. Quizzle were among the earliest websites to give
away credit scores, and varying
It was at this point the amounts of credit report data,
consumer press began asking to consumers who would sign
questions, in earnest, about up at their websites. Today the
credit scoring. And because number of websites that give
credit scoring had never been away credit scores is substantial.
used to any meaningful degree
by mortgage brokers or lenders,
they too started asking Additionally, a growing number
questions about credit scoring. of banks and credit card issuers
As a result, credit scores landed are willing to give away credit
on the radar of the consuming scores to their customers,
public. I personally made normally as part of their
countless presentations to monthly statements. In fact, at
consumer groups, mortgage banker groups, mortgage this point it’s very easy to find some method where
broker groups, and any other groups that wanted to you can see a number of your credit scores at no
learn more about those mysterious three-digit numbers. cost and, at worst, on a monthly basis.
For Sale to Consumers From a risk assessment tool to a fee-based product
When the Internet started to become more commonly sold to consumers to a free give-away, the credit
used by a critical mass of consumers, there were several score has evolved well beyond its original intended
companies that had the bright idea to sell credit reports purpose, which was simply to help lenders assess the
and credit scores to consumers online. This happened risk of doing business with borrowers. One final
around the turn of the century, give or take. The credit interesting nugget: the credit score hasn’t really
score had officially evolved from a tool used by lenders changed in its stated purpose. It’s still primarily used
to assess risk to a product sold directly to consumers. by lenders and it’s still designed to predict risk
accurately. And collectively, some 20+ billion scores
This “B2C” (Business To Consumer) distribution of are used every single year, a truly staggering
credit-related products included the sale of credit number considering there are only about 220
reports, credit scores, and credit monitoring services. At million people who have a credit report.
this point, the scores being sold to consumers were
largely of the “educational” variety, meaning they were Disclaimer: The views and opinions expressed in this article are
not the same scores that were being sold to lenders. those of the author John Ulzheimer and do not necessarily
Educational scores are no longer the scores being reflect the official policy or position of VantageScore Solutions,
provided to consumers online. They have long been LLC.
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