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Lending has changed dramatically over the past 40 years following the explosion of Al and data science tools. The quantification of creditworthiness began as early as the 50s, and by 1989, FICO released the first universal credit score. The FICO score became the industry standard in 1995 when Fannie Mae and Freddie Mac decided that every mortgage application required a borrower's FICO score. Since then, credit scores have become lenders' primary tool to determine creditworthiness, even as underwriting methods have transformed.
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From Humans to Credit Models
However, lending decisions were still almost exclusively made by humans. In the early 2000s, this began to change as innovation-focused lenders like Capital One started experimenting with algorithmic lending in 2001. It wasn't until 2005 that the market saw new players primarily focused on Big Data and algorithmic lending, like Prosper and Lending Club.
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