About Credit Scores
Your credit score is the number used to evaluate future credit risk based on a snapshot of your credit profile at a particular point in time. The most widely used credit-scoring method, developed by the Fair Isaac Corporation, is better known as your FICO score.
Fair Isaac distributes variations of the FICO formula separately to each of the national credit reporting agencies (also known as credit bureaus): Equifax, Experian and TransUnion, causing you to have 3 different credit scores.
Home lenders, insurance agents, credit card companies, and auto dealers use credit scores to establish your monthly payment and contract terms. In the eyes of a creditor, the higher your credit score, the more likely you are to pay in accordance with your contract terms. FICO scores are used to help make millions of credit decisions every year.
Credit scoring is one of the reasons why consumer credit exploded in the 1990s. Lenders felt more confident about making loans to wider groups becuase they had a more precise tool for measuring risk. Credit scoring also allowed them to make decisions faster, enabling them to make more loans. The result was an unprecedented rise in the amount of available consumer credit. Here are some examples of how available credit expanded during that time.
The total volume of consumer loans -- credit cards, auto loans, and other non mortgage debt -- more than doubled between 1990 and 2000, to $1.7 trillion.
The amount of credit card debt outstanding rose nearly three fold between 1990 and 2002, from 173 billion to $661 billion.
Home equity lending soared from $261 billion in 1993 to more than $1 trillion 10 years later.
Credit Scores Vs. Population
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