Introduction - KSLA News 12 Shreveport, Louisiana News Weather & Sports

Introduction

The subject of credit scoring has become an increasingly hot topic, and for good reason. For many years, the general public only associated the concept of credit scoring with the need to purchase high ticket items such as a new car or a home. Today, credit scoring goes much further. Your credit score can affect your ability to get a good rate on commodities such as car insurance, cell phones, or even determine whether or not you get the job that you want.  Indeed, the financial snapshot provided by the credit score has also become a gauge for many employers, especially those who seek to place employees in a position of financial responsibility.

 

The History of Credit Scoring

The credit score system used today has evolved since the 1960s. It was originally designed to provide lenders with financial profiles on consumers who wished to borrow money.  The lenders’ biggest concern was whether or not an individual had the ability to repay a loan, and establish what percentage of risk might be involved.

 

Congress passed the Fair Credit Reporting Act in 1971 to establish guidelines for fair practices in regard to the use of credit scoring. This law was designed to promote accuracy in reporting and protect the privacy of consumers. In light of the increased use of credit scoring and a growing fear of identity theft, recent legislation has been passed to further protect Americans and improve consumer awareness.

 

The Fair and Accurate Credit Transactions Act of 2003 (sometimes referred to as The FACT ACT or FACTA) was signed by President George W. Bush on December 4, 2003.  This amends the Fair Credit Reporting Act, and provides each American the ability to obtain one free credit report every 12 months from each of the three main credit reporting agencies (CRAs); Equifax, Experian and TransUnion. Those bureaus have created a central web site, www.annualcreditreport.com, to accommodate Americans who wish to obtain copies of their credit report. Phase in of access to free credit reports from West Coast to East Coast nationwide will be complete as of September 1, 2005. See www.annualcreditreport.com for a zoning map.

 

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