Welcome to CREDIT CARD SMARTS!

Let's face it, in today's world your name is only as good as your credit. Maintaining your credit should be one of the most important things in your life. By browsing "Credit Card Smarts" you will learn beneficial credit tips that will help you build your credit score. Enjoy all of the information that you can obtain from this site.

If you have never had credit before and are finally ready to start building a credit history, this site can help you.

If you have had credit in the past and basically "screwed it up," you may need to re-establish your credit. Let "Credit Card Smarts" help you.

If you have good or excellent credit, we can still help you by sharing the most valuable credit card tips that you can find online. No matter what your situation is, you will greatly benefit from this site.

History of Credit Scoring

The popularity of credit scoring probably began in the late 1970's as most major lenders were using some kind of credit scoring formula. The idea of this credit scoring thing came from an engineer named Bill Flair and a mathematician named Earl Isaac. These two ended up convincing lenders that mathematical formulas could do a better job for them to predict if someone would default or not. With the help of computers, decisions could be made on the spot with this new formula also. This new formula took into account your income, occupation, length at your job, length at your address and what was the longest time that a payment was over due. All these calculations were pretty much invisible to the consumer though and were hardly even understood by most experts in the field. Fair Isaac ended up developing the first major credit bureau based scoring system in the mid 1980's which eventually led to the biggest lending databases - those that are held at the major credit bureaus - Equifax, Experian and Transunion. Instead of basing calculations on any single lenders experience, this type of scoring factored in on the behavior of millions of different borrowers. The system looked for patterns that could indicate if a borrower would default. This system checked the consumers history of paying their bills, how many credit accounts they had open and how much of the available credit they were using. Besides using this system to simply accept or reject an applicant this system even had more advantages. The lenders could accept a high risk applicant if they wanted to and charge them a higher interest rate, which of course is more money for them to make and also they could get peoples scores who met their criteria and send them pre-approved offers, it was a win-win situation for lenders. In the 1990's lenders felt real comfortable about making loans with this credit system and this is the reason that consumer credit absolutely exploded in the 90's.

Between 1990 and 2002 the amount of credit card debt rose from $173 million to $661 billion.

The 90's was also a time when consumers learned that the reason that they may have been rejected a loan was because of a three digit number. When consumers asked for more details about how this scoring system worked they got no answers as Fair Isaac, the leader in the credit scoring world wanted to keep it a secret and said that the consumer would not understand their formula anyways. Fair Isaac actually thought that if their formulas were made public that people would start changing their habits so they can boost their credit scores. We now move ahead to the year 2000, that's when internet lender E-Loan let consumers view their FICO credit scores online. This lated about a month and 25,000 people took advantage of this and also gained lots of knowledge about how the credit scoring system formula worked before E-Loans credit score source was cut off. A few months later Fair Isaac felt the pressure from advocates and gave in. It posted the 22 factors that affect a credit score on its website. After that they partnered with Equifax to provide consumers with their credit scores and reports for a fee. In 2003 congress made a law that gave people the right to see their scores, even though at the time having access to your credit score was a norm.


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