The History of Credit Scores and Why They Matter Today

Modern consumer credit scores became widely used in 1989 with the launch of the Fair, Isaac and Company (FICO) score. There are three credit bureaus that keep track of your credit reports: Equifax, Experian and TransUnion. Prior to this system, human judgment and subjective evaluation were used to determine creditworthiness.

Key Takeaways

• Modern credit scores launched in 1989 when FICO and Equifax introduced the Beacon score, replacing decades of subjective lending decisions with a data-driven model now used by 90% of lenders.

• Before consumer scores existed, credit reporting started in 1841 with Lewis Tappan's Mercantile Agency, which evaluated businesses based on reputation and laid the groundwork for today's three bureaus — Equifax, Experian and TransUnion.

• Check your score regularly since it shapes your loan approvals, interest rates, rental applications and even job offers. Focus on payment history and credit utilization, which together drive 65% of your FICO score.

Summary generated by AI, verified by MoneyLion editors

When Were Credit Scores Invented?

The first widely used U.S. consumer score was launched in 1989 with the FICO score. It was created by mathematician Earl Isaac and engineer Bill Fair.

FICO developed a credit score model that the average consumer needed to obtain lending.

Prior to FICO, 19th century scores were business ratings, not consumer scores. The first credit reporting agency, Mercantile Agency, was founded. Mercantile Agency used to gather information about the creditworthiness of businessmen.

Robert Graham Dun and John M. Bradstreet established two of the most well-known agencies in the mid-1800s: R.G. Dun & Company and the Bradstreet Company.

Timeline of Credit Score History

What Was Used Before Credit Scores?

Prior to credit scores, lending decisions were based on human judgment and had room for error and inconsistency.

In 1841, Lewis Tappan founded the Mercantile Agency, considered the first commercial credit reporting agency in the U.S. The company collected information about lenders and borrowers through correspondents across the country. This assessment was often based on reputation.

Later, R.G. Dun & Company and The Bradstreet Company expanded commercial credit reporting and helped standardize business credit evaluations in the mid-1800s. These systems eventually laid the groundwork for modern consumer credit reporting and scoring models.

How Modern Credit Scores Work

Modern credit scores are calculated using factors like:

• Payment history

• Credit utilization

• Length of credit history

• Credit mix

• Recent credit inquiries

These numbers determine a consumer’s creditworthiness and ultimately affect their ability to gain more credit.

→ Find out: Do other countries have credit scores?

FICO Score Percentages

FICO uses five major categories to calculate your credit score, with payment history carrying the most influence.

• 35% = payment history: The most important percentage is your payment history. How many on-time payments vs. late or missed payments have you made?

• 30% = amounts owed: What are your credit limits and how much do you owe relative to those credit limits?

• 15% = length of credit history: How long have you had your accounts?

• 10% = credit mix: What type of variety do you carry in your credit mix? Do you have loans, credit cards or a mixture of both?

• 10% = new credit: How many recent hard inquiries have you had on your credit report?

How To Check Your Credit Score Today

Today, consumers can access their credit reports and scores through a variety of free and paid services.

• You can get your credit report free every year through AnnualCreditReport.com. However, these reports don’t include your credit score.

• Several websites, mobile apps and even some credit card companies provide you with your credit score from one, if not all three, of the credit bureaus.

• You can also receive your credit score when applying for credit, typically in the mail from the credit bureaus.

FICO vs. VantageScore

Your FICO score is used by 90% of all lenders and is important for auto, home and personal loans.

Your VantageScore is a value created by the three credit bureaus, but it’s less relevant in lending decisions. It’s a common number seen in free credit apps.

Why Credit Scores Matter Today

Credit scores determine approvals for loans, mortgages and credit cards. Your score impacts how much you qualify for and the interest rate.

Generally, the higher the score, the lower the annual percentage rate (APR). The lower the score, the higher the APR and the less money you’ll receive.

Some employers check your credit score before hiring you for employment, while landlords may take a look at the score before renting you an apartment. Your credit score has the potential to impact your insurance rates as well.

Are Credit Scores Here to Stay?

Credit bureaus and your credit score are likely here to stay. The history of credit scores has evolved since the 1800s, but one thing that’s stayed consistent is that they measure your creditworthiness. It’s important to know where your score starts from and do your best to take care of it.

Key Terms

• Credit score: A three-digit number, usually 300 to 850, that predicts how likely you are to repay debt on time using information from your credit reports.

• Credit report: A record of your credit history, including accounts, payment history, balances and certain inquiries.

• FICO score: A credit score created by Fair Isaac Corp. that lenders use to help judge credit risk and borrowing terms.

• VantageScore: A credit scoring model created by Equifax, Experian and TransUnion that ranges from 300 to 850.

• Credit utilization ratio: The percentage of your available revolving credit you’re using. Lower utilization can help your credit score.

Summary generated by AI, verified by MoneyLion editors

FAQs

When did credit scores start?

They started in 1989 with the launch of FICO.

What was used before credit scores?

Manual reports, subjective evaluations and human judgment were used prior to credit scores.

Why were credit scores invented?

Credit scores were invented to allow credit institutions to determine a borrower’s creditworthiness.

LaKenya Hill contributed to the reporting for this article.

Sources

• Consumer Financial Protection Bureau. 2023. "What is a credit score?"

• Consumer Financial Protection Bureau. 2024. "What is a credit report?"

• myFICO. "What is a FICO® Score?"

• VantageScore. 2025. "The Complete Guide to Your VantageScore 4.0 Credit Score."

• Equifax. "What Is a Credit Utilization Ratio?"