The History of Credit Reporting and Credit Scores: 1841 to the CFPB
1841: The First Credit Reporting Agency
Credit reporting began with businesses, not consumers. In 1841 the New York merchant and abolitionist Lewis Tappan founded the Mercantile Agency, which collected reports on the reliability of merchants from a network of local correspondents — often attorneys, one of whom, early in his career, was Abraham Lincoln — and sold access to the resulting files to wholesalers deciding whom to extend trade credit to. The agency passed to Robert Graham Dun and became R. G. Dun and Company; in 1933 it merged with a competitor founded by John Bradstreet to form Dun and Bradstreet. The core idea was already fully formed: pool information about repayment behaviour from many creditors so that any one creditor can see what the others have experienced.
1899-1970: Consumer Files, Computers, and the Fair Credit Reporting Act
Consumer credit reporting followed. The Retail Credit Company, founded in Atlanta in 1899, built files on individuals for retailers and insurers; it was renamed Equifax in 1975. By the 1960s these files had been computerised, they were large, and they frequently contained subjective material — remarks about a subject's habits and associations — that the subject could neither see nor challenge. Congressional hearings led to the Fair Credit Reporting Act, enacted in 1970 and effective in April 1971. The FCRA gave consumers the right to see the contents of their own file, to dispute inaccurate information and have it investigated, and to be told when a report was used against them, while limiting how long most negative items may be reported and restricting who may obtain a report.
1956-1989: Fair, Isaac and the Rise of the Score
In 1956 the engineer Bill Fair and the mathematician Earl Isaac, who had met at the Stanford Research Institute, founded Fair, Isaac and Company in California to apply statistical methods to lending decisions. Their argument was that a model fitted to repayment outcomes would be both more accurate and more consistent than individual judgement. For decades the company built custom scorecards for individual lenders. The decisive change came in 1981, when it introduced credit bureau risk scores, and in 1989, when the first general-purpose FICO score was launched for use across bureaus. A single number on a 300 to 850 scale, computed from the file rather than from the application, made underwriting comparable across institutions and reshaped how consumer credit was priced.
1974-2003: Equal Access and Free Reports
The Equal Credit Opportunity Act of 1974 made it unlawful to discriminate in any aspect of a credit transaction on the basis of sex or marital status; amendments in 1976 extended the prohibited bases to race, colour, religion, national origin, age, and the receipt of public assistance income. Before it, married women were routinely unable to obtain credit in their own names. The ECOA also requires a creditor that takes adverse action to provide the specific principal reasons. In 2003 the Fair and Accurate Credit Transactions Act amended the FCRA to entitle consumers to a free copy of their credit report from each nationwide bureau every twelve months, delivered through a single centralised source, along with new identity-theft protections such as fraud alerts.
2006-2011: VantageScore and the Consumer Financial Protection Bureau
In 2006 the three nationwide credit bureaus — Equifax, Experian, and TransUnion — jointly created VantageScore as a competing scoring model built on a common methodology across all three files. Its first two versions used a 501 to 990 range; VantageScore 3.0, released in 2013, moved to the same 300 to 850 range as FICO, and later versions retained it. Meanwhile the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 created the Consumer Financial Protection Bureau, which began operating in 2011 with supervisory authority over the nationwide credit bureaus, a public consumer complaint database, and rule-writing authority transferred from several other agencies over the FCRA, the ECOA, and the truth-in-lending rules.