When Were Credit Scores Invented?

Written By
G. Dautovic
July 07,2023

Credit scores are a part of modern life. They’re an essential tool lenders use to assess your creditworthiness – i.e., your ability to repay loans. The riskier you appear, the higher the interest rates you’ll pay. 

But have you ever wondered where they come from?

In this post, we ask: When were credit scores invented? We then move on to why they were created and what they mean for you. 

Before Modern Credit Scores

The history of credit scores and how they developed is fascinating. Today, FICO and VantageScore calculate individuals’ and businesses’ ratings and then pass them on to credit bureaus who use them to rate creditworthiness.

The better your score, the more likely you are to qualify for loans and lower rates of interest. 

However, it wasn’t always like this. Before FICO and VantageScore were created, lenders considered borrowers based on their subjective interpretations of their merit – a process often involved going through detailed interviews. 

To take out a loan in the past, the applicant would go to the bank and speak with a bank manager. The manager would then make a personal judgment call based on the information provided by the individual on whether to make the loan or not.

While bankers tried to be objective, they found it difficult. Without a credit score history, they had no accurate way to measure the creditworthiness of the person in front of them. 

Because of this, it took an enormous amount of time to take out a loan. What’s more, people could find themselves turned away by banks for reasons we wouldn’t accept in the 2020s, such as the way they dressed or the color of their skin. 

Mortgage applications were particularly drawn out. Banks were often extremely risk-averse, performing check after check to make sure that the applicant was good for the money.

They often missed opportunities to attract good customers, and lent money to people who couldn’t afford to pay it back. Without credit scores, they simply had no predictive insight. 

Who Created Credit Scores and When?

The first credit scores were created by FICO. 

FICO is an abbreviation of Fair, Isaac and Company, founded by Bill Fair and Earl Isaac in 1956. The organization's goal was to help lending companies, such as banks, make better decisions about who they lent to by improving the information available to them about applicants’ credit status.

In 1958, the duo developed the world’s first credit scoring system and then sold it to various US lenders over the following years.

The company continued in this way until 1989 when it introduced the first credit bureau-based scoring system in partnership with Equifax. By 1991, all three major bureaus in the US had signed up for the scheme. 

FICO’s first credit bureau risk score ran on a scale from 300 to 850. FICO made it clear to lenders that applicants who had higher scores were much more likely to meet their repayment obligations than those with lower scores. 

To create the scores, FICO collected vast amounts of data on borrower behavior and stored it all in a central repository. It then used the information to add or subtract from the score.

For example, if a borrower missed a payment on a mortgage loan, it might reduce their FICO score by 20 points. If they made regular payments, it might add 20 points to their score.

The first general-purpose FICO score meant that lenders could apply the same principles across all loan types. A borrower’s rating was indicative of their risk, meaning the system could be applied to mortgages, business loans, car loans, personal loans, and credit cards

Over time, FICO refined its methods to improve its assessment of a borrower’s risk. By collecting more data on applicants’ characteristics and comparing them to loan repayment histories, the company was able to give lenders near-perfect assessments of the likelihood of borrowers paying them back or not. 

What About VantageScores?

FICO isn’t the only credit scoring system in the world, though. In 2006, the three major credit bureaus – Equifax, TransUnion, and Experian – set up VantageScore. 

In the early days, VantageScore’s credit scores ranged from 501 to 990. However, the credit bureaus later changed this to 300 to 850 to bring the rating organization in line with FICO (as this was less confusing). 

It applied the same general categories as FICO, with slightly different cutoffs. Here’s how the scoring worked: 

  • Exceptional: 800-850
  • Very good: 740-799
  • Good: 670-739
  • Fair: 580-669
  • Very poor: 300-579

Despite the popularity of FICO, thousands of lenders worldwide now also use the VantageScore method. It has moved beyond an educational source to become a working tool in financial markets. 

VantageScore also makes it easier for consumers to access their credit scores. Under the old FICO system, it was impossible for them to discover their creditworthiness without first applying for a loan.

However, in 2008, VantageScore let consumers access credit score information online in a way that wouldn’t trigger any points changes – often by simply logging onto a credit bureau website and filling out a few forms. 

Problems With the Modern Scoring System 

Both FICO and VantageScore use similar systems to rate applicants’ creditworthiness. For most practical purposes, they’re identical. 

Generally speaking, they have improved the situation for consumers. Thanks to these objective credit scoring methods, people can take out loans at suitable interest rates, instead of relying on the whims of bankers. 

But while the lending situation is considerably less biased than it was in the past, there are still problems with the current arrangement. 


Credit report compiling is, for the most part, automatic, without any human oversight. Unfortunately, this means there are often errors in individuals’ credit reports. 

According to a Federal Trade Commission investigation conducted in 2013, about 26% of consumers had mistakes on their credit reports, which had a material impact on their ability to borrow. In 5% of cases, corrected mistakes qualified people for lower payments on their existing loans.

Voluntary Reporting

Another issue is that creditors are not legally obliged to report information about your creditworthiness. That’s why sometimes, making regular payments on things like your mortgage, rent, and utility bills may not form part of your credit report, making you appear less trustworthy than you actually are. 

Lack of Understanding

Lastly, most Americans still don’t understand how credit scores work. More than 58% of low-income consumers say their knowledge of their credit reports is either “fair” or “poor.”

How To Improve Your Credit Score

Fortunately, there are multiple ways to improve your credit score. These include: 

  • Paying all your bills on time. If you pay late, creditors may report late payments to credit bureaus, adversely affecting your score.
  • Reducing your credit utilization ratio. Don’t max out all your credit cards and go into large amounts of debt, relative to your credit limit. The closer you get to the threshold, the less creditworthy banks will judge you.
  • Hire a credit repair service. If you don’t feel up to the task of disputing an incorrect entry in your credit report on your own, there are companies specializing in helping customers improve their scores. 
  • Use Experian Boost. This free service, available from Experian, shows you how you can improve your credit score by giving it permission to view your bank account. 

Wrapping Up

So, when were credit scores invented? The answer is 1956 with the founding of Fair, Isaac and Company’s new objective system for measuring creditworthiness.

Credit scores massively improved upon the old interview-based system of assessing credit risk, but they’re still prone to issues, such as bias, lack of reporting, and inaccuracies. 


When did the US start using credit scores?


The US began using credit scores after 1956 when mathematician Earl Isaac teamed up with engineer Bill Fair to create the FICO company. In 1958, the brand began selling objective credit reports to lenders to help them better decide who to lend to.

What did they use before credit scores?


Before credit scores, lenders used to interview loan applicants. It was a long-winded and subjective process that was often influenced by the bank manager’s personal opinion of the would-be borrower.

When was Experian founded?


Experian – a major credit bureau – was founded in 1996. It now collects credit information from over a billion businesses and people, including more than 235 million US consumers, and 25 million US companies.

When did credit scores start?


Credit scores were invented around 1956 and then started being used in 1958 in some banks. FICO was the first system, followed by VantageScore in 2006.

About author

I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.

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