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Have you ever wondered about those three little numbers that determine your credit score? Where did they come from?

Reasoning and history behind the scores

Lenders needed a way to simplify the loan approval process. They wanted to make it more streamlined and uniform to reduce costs and more impersonal to avoid lawsuits. To solve this problem a company named Fair Isacc Corporation developed a credit risk model based on thousands of credit scores.

· Bill Fair was an engineer and Earl Isaac was a mathematician. Together they founded the Fair Isacc Company in 1956, now known as the Fair Isaac Corp. or more commonly known as FICO.

· In 1997 Bill Fair and Earl Isaac were honored with Distinguished Service Awards by the American Bankers Association for their pioneering work in credit scoring.

· FICO is a number between 350 and 850 that tries to determine the credit risk of a consumer. Conventional wisdom says the higher the score, the less risky the loan.

· FICO is based in Minneapolis, MN with offices in North America, South America, Europe, Australia and Asia.

The numbers behind the person

Your FICO is a measure of credit risk calculated from a complicated and standardized formula. These numbers are dependent upon your length of credit history, how timely you have made payments, and how wisely you have used credit granted to you. Lenders use the credit score to determine whether to provide you a loan and what rate to charge. This is the score your mortgage company looks at when you apply for a loan, and these scores are becoming increasingly popular for other types of credit. Credit cards approval and lease rentals are two other areas affected by these 3 numbers.