History of Credit and FICO Scores
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Learn more from the full courseWhat the FICO 2.0: The Essential Guide to Credit Excellence
Your Complete Guide to Fixing Bad Credit, Building Good Credit, and Taking Good Credit to Credit Excellence!
52:37 of on-demand video • Updated January 2018
- Understand what is on your credit report and how that effects you
- How to remove negative items from your credit report
- The basics of FICO and how to use it to improve your credit
- How to fix bad credit
- How to maintain a good credit score
- How to go from good to excellent credit
English [Auto] So welcome to module one the history of credit and FICO scores in this module. You'll learn everything about the history of credit. When did it start. Why did it start. Why is it even important. You'll also learn the origins of Fikile. What is Feigele. What does it stand for. Is it a person who is it. What does it do. We'll introduce Michael to you and go back way back to 3000 B.C. up until today. So let's get started. Credit is simple is the concept of buy now pay later and it's been around for many many years. In fact some believe credit goes back more than 3000 years. And starting with the Egyptians and Babylonians. So you can imagine that credit as we know it today has had many many evolutionists believe it or not. Not long ago that information was gathered by the welcome wagon representative who would judge you based on things like the quality of your hole your furniture your car etc. or the welcome wagon represented you may as well. They were Khamoshi breeders not new neighbors door to welcome them to their neighborhood. Back then if you apply for a loan the lending decisions were made based on what was on your report which is someone's opinion on how the underlying either Banks felt about you. Yup their intuitive hunch for this is you to look right all of you are from some minority group or lived in a one neighborhood then your chances of getting credit were slim to none. Around the late 1960s as it became popular it was impossible for banks to personally interview or applicants or rely solely on the clear reports it was using. At the same time Congress had begun investigating discrimination cases including housing loans and practices of collection agencies. Because of this we sold a book to read federal regulations that would ever impact the credit game. In 1971 we were introduced to the Fair Credit Reporting Act or fibro we tried to make sure that your credit report was accurate. Fear and private. In 1975 we were introduced to the Fair Credit billing pack or SCBA. We tried to protect consumers from unfair billing practices and to get us consumers a way to address billing errors in our credit accounts and lastly. In 1977 we were introduced to the Fair Debt Collection Practices Act or FDIC which tried to eliminate abusive practices by debt collectors and aim to make sure that what was only a quarter of what was or what needs to be regulations for credit reporting agencies to act in a more respectable and responsible manner. Of course there were loopholes as the information in a person's credit report became more standardized credit providers began to rely on them more than on the gut feeling of the holder right. Lenders started to create automated restoring system but because the results were inconsistent and inaccurate. They continued to look for a system that was more reliable what Delphi go and to be fair and all eyes are the founders of the Fair Isaac Corporation which is better known as psycho in 1956 they started psycho as a way to develop and market the credit scoring concept in the early years by go back into their smoking systems of financial services companies that were trying to find a faster and more accurate way to make credit decisions. The breakthrough came during the late 1980s as computer software automation became popular with many businesses. In 1989 Michael introduced an automated credit scoring system that was marketed as the posho consistent way to evaluate credit applications. Taking the prejudice and staying out of the equation in layman's terms that's really the most accurate consistent and fair way to judge someone's credit worthiness. Given that lenders were being quick under pressure by Congress to get rid of discriminatory lending practices like redlining a discriminatory practice by which insurance companies etc. refused or limit loans mortgages etc within specific geographic areas especially in inner city neighborhoods it would literally draw a red line on a map to signify where big can and can't land because of this seems to be the answer to their problems and the system was quickly embraced by credit card companies and other credit issues. This was the beginning of psycho's reign as the premier a universally accepted credit scoring system then in nineteen ninety five. The deal was sealed when top mortgage issuers Fannie Mae and Freddie Mac stipulated that mortgage lenders a corporate Feigel source in the approval process. This is why today the final score is the most important score as it relates to your credit cycle. Isn't the only game in town go back on the market. There are hundreds of other stores sold by the credit goes to lenders insurance companies credit card companies landlords finance companies telephone companies and any other entity that media it a mission for sales or marketing purposes. There are stores that tell lenders might be likely to fall on the mortgage who should be offered lower interest rates or you should have higher limits on their credit cards. Even Globus was used by large corporations conducting business internationally. In 2006 the band Ishwar was created in collaboration with the three credit bureaus. STRANGER In fact an experience and a concerted effort to overtake FEIBEL lead in a market where two score became a new generic exclusive score bottle marketed as a more consistent interpretation and accurate scores and. Despite all of the competition. And for now VicRoads work continues to be the leader of the sport that matters most to credit excellence efforts. Shut the front door so you understand Fikile you'll understand how to start the product excellent process. Here is a recap. One credit is 3000 years old a piece to be really really unfair to the laws created to help protect you from fear private practices. Michael was created as a way to judge someone. Credit worthiness for the many scores you understand how Fikile works you can affect all the others. That's it for Module 1. I'll see you at the next module which is the basics of Fika and this module will discuss what the final score ranges are. Who are the big three. The factors that go into your final score. And lastly the categories that matter most. All right that's it. See you in a sec.