|
History of Credit Scoring
Credit reporting was born more than 100 ago, when small retail merchants banded together to trade financial information about their customers. The merchant associations then turned into small credit bureaus, which later consolidated into larger ones with the advent of computerization.
By the 1960s, controversy surfaced over the consumer reporting agencies (CRAs) since the credit reports were being used to deny services and opportunities, and individuals had no right to see what was in their files. In addition, CRAs back then reported only negative financial information as well as "lifestyle" information culled from newspapers and other sources -- information such as sexual orientation, drinking habits, and cleanliness.
The controversy led to a congressional inquiry, and in 1971, Congress passed the Fair Credit Reporting Act (FCRA), which established a framework for fair information practices to protect privacy and promote accuracy in credit reporting. Consumers gained the right to view, dispute and correct their records, and CRAs began to supplement the often-bleak reports with information on consumers' positive financial history.
However, it wasn't until 2001 that consumers gained direct access to their credit scores. Earlier that year, Consumer Reports had documented the problem of credit scores being off limits to consumers in an article entitled "New Assault on Your Credit Rating." The article, combined with growing pressures from lending institutions wanting to disclose scores to consumers, finally opened credit score information to individuals. An updated version of the FCRA, signed into law by President George W. Bush in December 2003, requires CRAs to provide consumers a copy of their credit score at a "fair and reasonable" fee.
More recently, starting December 1, 2004, consumers living in the western U.S. will have the right to order a free copy of their credit report under the Fair and Accurate Credit Transactions Act (FACTA) and the Fair Credit Reporting Act (FCRA). FACTA, which was enacted on December 4, 2003, amends the FCRA and requires, among other things, that the three nationwide consumer reporting agencies (CRAs) - Equifax, Experian, and Trans Union - provide to consumers, upon request, a free copy of their credit report once every 12 months.
All U.S. consumers will become eligible for free reports on the following schedule: WESTERN STATES: Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming) will become eligible on December 1, 2004; MIDWESTERN STATES: (Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin) will become eligible on March 1, 2005; SOUTHERN STATES: Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee, and Texas ) will become eligible on June 1, 2005; and EASTERN STATES: (Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Vermont, Virginia, and West Virginia) and Puerto Rico, and all U.S. territories will become eligible on September 1, 2005. Top....
|