How Credit Scoring Came into Being

The question remains: How did one little number come to have such an outsized effect on our lives?

Credit scoring has been in widespread use by lenders for several decades. By the end of the 1970s, most major lenders used some kind of credit-scoring formulas to decide whether to accept or reject applications.

Many were introduced to credit scoring by two pioneers in the field: engineer Bill Fair and mathematician Earl Isaac, who founded the firm Fair Isaac in 1956. Over the years, the pair convinced lenders that mathematical formulas could do a better job of predicting whether an applicant would default than even the most experienced loan officers.

A formula wasn’t as subject to human whims and biases. It wouldn’t turn down a potentially good credit risk because the applicant was the “wrong” race, religion, or gender, and it wouldn’t accept a bad risk because the applicant was a friend.