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The History Behind Credit Scores and Why They Matter


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To delve into the intricate realm of credit scores, our historical journey begins in the early 19th century, led by the forward-thinking Lewis Tappan. In 1841, Tappan, an American merchant, laid the foundation for the first US agency dedicated to rating commercial credit. At its inception, the focus was primarily on assessing the payment capabilities of business borrowers, a far cry from the comprehensive consumer-centric credit evaluations we know today.

Fast forward to the dynamic landscape of the 1960s, and credit reports underwent a transformative evolution. No longer confined to financial data alone, these reports became a repository of personal character, reflecting an individual's morality and goodness, intricately tied to their willingness to meet financial obligations. However, as technological advancements led to the digitization of records in subsequent decades, credit reports were streamlined to emphasize essential details: account names, balances, payment history, and records of opened or closed accounts. This transformative period also witnessed the birth of the FICO score in the 1980s, a pivotal development that standardized credit assessment.

In our contemporary era, where credit scores wield unparalleled influence over our ability to make essential purchases, it's perplexing that a substantial number of individuals remain in the dark about their own scores. What contributes to this lack of awareness? Many shy away from checking their credit reports due to the incessant bombardment of solicitations for credit monitoring services from major credit agencies. Additionally, there's a prevalent misconception that obtaining one's credit report requires payment.

Over the years, credit agencies have consolidated into three major players—Equifax, Experian, and TransUnion. Notably, there are ongoing proposals to establish a federally backed credit bureau under the aegis of the Consumer Financial Protection Bureau, potentially reshaping the landscape of credit reporting and regulation.

Despite the challenges, it's imperative to emphasize that individuals can access their credit reports at no cost, up to six times per calendar year. This accessibility holds the key to unlocking a realm of financial opportunities, as a good credit score is not merely a number but a passport to favorable terms, opportunities, and financial well-being. Understanding the historical evolution of credit assessment underscores the critical role these scores play in our lives and highlights the pressing need for enhanced awareness and education surrounding them.

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About the author

Van Pappas Headshot

Van Pappas

Vice President, Private CFO®

Van Pappas, CFP® - Van is a native of Atlanta. He holds his undergraduate degree in Finance with an emphasis in Real Estate. As a planner for 15 years, he earned his CFP designation from Kaplan University. He is currently the Chairman and founder of the Chamblee Chamber of Commerce and sits on the Downtown Development Authority for the City of Chamblee. In 2012, he noticed the value of helping the X-Y Generations and decided to merge his practice with oXYGen Financial.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice. Investor Disclosures:

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

Background and qualification information is available at FINRA's BrokerCheck website.

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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.

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