Credit Scoring History

The credit score system used today has evolved since the 1960’s.  Originally, it was designed to provide lending institutes with financial information on consumers who want to borrow money.  The lender’s concern was whether or not an individual had the ability to repay a loan and determine the percentage of risk that was involved.

The Fair Credit Repair Act was passed in 1971.  This established guidelines for fair practices in regard to the use of credit scoring.  The law was designed to promote accuracy in reporting and to protect the privacy of consumers.  Due to the increased use of credit scoring and an escalating fear of identity theft, current legislation has been passed to further protect Americans and improve consumer awareness.

So, what approach to fixing credit inaccuracies is appropriate?  Consider ours here.


The Fair and Accurate Credit Transactions Act of 2003 (also referred to as The FACT, ACT or FACTA) was signed by President George W. Bush on December 4, 2003.  This amended the Fair Credit Reporting Act, allowing each American to obtain one free credit report every 12 months from each of the three main credit reporting agencies; Equifax, Experian, and TransUnion.  Please contact us to obtain copies of your credit reports.


The Five Factors of Credit Scoring:
Your credit score is comprised of five factors and points are awarded for each of the five factors. A high score is the most favorable. The components are as follows in order of importance:
  1. Payment History – 35% Impact
  2. Outstanding Credit Balances – 30% Impact
  3. Credit History – 15% Impact
  4. Type of Credit – 10% Impact
  5. Inquiries – 10% Impact


How long will you live with bad credit?  See our section relating just to this here.

Low Credit Scores affect on Interest Rate
Lenders estimate your ability to pay back on loans based on your credit score.  The risk factor they take on is built in to your interest rate as a financing fee.  A low credit score results in a higher interest rate, higher monthly fees, and a higher amount of interest being paid over the total life of the loan.  Your credit score can be anywhere between 0 and 850.




When are you going to get tired of living with bad credit? 

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