Written By: Karen Deis, with Linda Ferrari, Credit Resource Group, Credit Scoring Expert. Pre-Order Her Book Now! Pre-release special of $25/book.

Susie Orman - beware! Linda Ferrari's new book entitled, The Big Score, debunks the advice from the so-called financial experts - when it comes to credit scoring!

I got to preview some of the chapters and Linda has allowed us to reprint Chapter 5! It's about the history of credit scoring and understanding how the credit scoring industry compiles information. It will give you a better understanding of how information gets processed, as well as how mistakes happen. The ultimate goal is that this important information will help you be wiser, better educated and show you where to go for information and help when there's a problem.

b>Order the book not only for your clients in management, but for your real estate agent so they too have a better understanding of credit scoring.

Read a brief excerpt, and then download Chapter 5 in its entirety.

Chapter 5 - Where Do Credit Reports & Scores Come From & How Many Do I Really Have?

Now that you know the costs and casualties of low credit scores and poor credit, let's talk about where credit scores come from, and cover some basic questions about credit reports and scores.

Although credit scoring has been around since the 1950's, it wasn't until the 1980s that it hit mainstream in the United States. Before that, lenders would use human judgment and personal opinion when evaluating a credit report to make a decision on an applicant's ability to repay debt. Not only was this a very slow process, it was unreliable because of human error. Fewer loans were made and it was much more difficult to qualify for financing than it is today.

The History of the Credit Report

Where did those reports come from that lenders based their judgments on? It all started in 1898 with two brothers who owned a grocery store in Chattanooga, Tennessee. Cator and Guy Woolford assembled credit records of local residents and created what they called, The Merchant Guide, which they sold to retailers for $25 per year. Retailers used the information as an indicator of consumer creditworthiness. Sounds to me like the making of the first credit report!

The Merchant Guide was so successful that the Woolfords set out to make credit reporting their career. Eventually their company, originally called Retail Credit, became Equifax, one of the nation's three major credit reporting agencies.

As with any successful business idea, you can imagine that hundreds of entrepreneurs followed in the footsteps of Retail Credit hoping to profit on the great idea of selling credit reports to lenders and banking institutions. However, only three credit reporting agencies have truly prevailed: The Big Three. Equifax, Experian, and TransUnion (also known as "The Credit Bureaus.")

The Credit Bureaus - Who Exactly Are the Big Three?

Mistakenly referred to as the "Government," the "IRS," the "devil," and many other names that would not be appropriate to list in this book, I have found that one of the biggest consumer misconceptions in credit is who the three credit bureaus really are.

The word "bureau" in the Encyclopedia refers to "public office, government agency, news bureau." No wonder there's so much confusion.

The credit bureaus are NOT government agencies. They do not work for banks or creditors, and they are not paid to make your life miserable - it just feels that way. They are three companies that saw a vision of huge profits to be made by collecting data about YOU from your creditors and reselling that data to prospective lenders, employers, insurance companies, utility companies, and, most recently, to YOU, the consumer.

Today, all credit reports have one thing in common: The Big Three. All credit report vendors get their data from these three credit reporting agencies. So I think it's extremely important that you familiarize yourself with who they are, and where they came from. I think you will be quite amused. I know I was.

Who is Equifax?

Download Chapter 5 in its entirety now. (11 page PDF document)

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