In the last year of the 1980s, when a recession similarly gruesome to that just faced by the United States brought the issue of blindly awarded unsecured debt to the forefront of our national agenda, the Fair Isaacs Corporation brought forth a sea change in consumer credit policy with their FICO credit scoring system. Though the FICO scoring matrix is, by some measure, the most popular of all the credit rating systems, it’s far from the only one. Since 1989, different companies have tried their own form of statistical evaluations: most notably, the Vantage system of credit scores that has become a favorite of auto dealers around America. Nevertheless, none has come close to the mass recognition and creditor trust of the FICO score, formerly known as the Beacon score.

A mathematical tool that greatly simplified the process of comparing different loan applicants’ potential risks for default, the FICO system was initially tested by the Equifax Credit Bureau and seemingly overnight became a focal point of American life. The FICO score is no longer just a shorthand code with which analysts can separate the wheat from the chaff regarding petitions for borrowed funds, rewarding the strongest histories of debt remuneration and dismissing the over leveraged heads of household. Purely on the basis of top echelon FICO scores, Americans are now granted second mortgages and credit lines without even questions asked about their income status

FICO credit scores are newly estimated whenever an agent working on behalf of a lender – or prospective employer, rental management group, etc – licensed by the Fair Isaacs Corporation conducts an inquiry over the computer. Since the very act of pulling credit from one of the reporting agencies will itself lower the overall score because of one of the many FICO peculiarities, the three digit number shall be constantly fluctuating by a small degree. To put into perspective the variances of credit scores, only 13 percent of borrowers have a score of eight hundred or higher; the average score is seven hundred twenty three. Just one thirty day late period could drop credit scores by as much as fifty points and, should you have one bad month, a thirty day late on all bills could lower the credit scores by somewhere between one hundred fifty and two hundred fifty points.

Fortunately, those who want to find out about their credit reports and scores have a number of options. You’ve likely seen the seemingly endless string of television commercials promising the free credit report service, but the companies advertised will only offer just what the government has already guaranteed while doing their best to trick the incautious consumer toward signing up for an expensive and largely unnecessary credit monitoring resource. In the past, forcing revision of a credit report – especially the addition of favorable information – would have necessitated a small fee paid to the credit bureau, but this is rarely the case nowadays. Each state, once again, shall feature slightly different guidelines limiting the damage of a single lapse, and this has indirectly aided borrowers’ credit scores as well.

Remember, the governmental arbiters have no authority with which to bend the FICO scoring model (since the Fair Isaacs Corporation’s privately owned and the credit reporting agencies pay handsomely to use their mathematical device) despite growing public dissatisfaction with perceived inequities endemic to the credit rating process. However, since the FICO logarithms are wholly dependent upon the data garnered from the credit bureau, a judgment or delinquency could hardly have adverse affects upon credit scores if the black mark no longer appears anywhere within a consumer’s credit history following the designated removal.

By: Cole Collins

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