What Are the Credit Score Companies in the USA?

Fair Isaac Corporation

Although the American credit scoring system goes back the late 19th century, it was not until the late 1980s that the Fair Isaac Corporation (FICO) introduced the first algorithm to measure a person's willingness or ability to pay back a creditor. As of 2011 the FICO score is the dominant formula in the consumer credit industry. When someone mentions credit scores, he usually means the FICO score.

The Credit Bureaus

Before 2011 some of the credit bureaus sold FICO scores, but none of the major bureaus -- Equifax, Experian and TransUnion -- do any more. The credit bureaus collect data and FICO develops its scoring system based on that data. All three of the major agencies have developed their own models in conjunction with FICO, so FICO scores and scores from the bureaus tend to be very close. However, most lenders prefer the FICO algorithm, because formulas from the bureaus tend to have slight variations that can cause fluctuations in scores.

The Others

Other credit scoring and credit reporting agencies exist, but hardly make a blimp on the radar of the lending industry. Most of these companies are called "alternative credit agencies" and only verify payment histories that customers send to them. Also, some creditors do not use the services of any credit scoring company, preferring to use their own model. Insurance companies, for instance, tend to have custom-designed formulas that include driving history.

The Future

The major credit bureaus constantly research new formulas that could surpass the FICO score, because every time the bureaus sell one of their proprietary scores they must pay Fair Isaac a royalty fee. In 2011, the current such model from the agencies is VantageScore. The agencies claim this model can reduce variations in scores, but as of 2011 less than 10 percent of all lenders use this model and those that do often still purchase a FICO score.