What Lenders See

This research project examines the long process of innovation at Fair Isaac, the analytics firm behind the FICO scoring system.

In the late 1950s, two young men, recently retured from the Korean War, started a company that would transform US consumer lending from a sideline of banking into a hugely profitable financial sector. William Fair and Earl Isaac worked from a San Francisco apartment by day and borrowed Standard Oil computers at night to build the first algorithms that applied data analysis and statistics to the problem of sorting credit applications. The result? When military-inspired operational research techniques were used to automate local practices of craft production, credit in America exploded and took on the qualities of a mass-manufactured product. This book project chronicles the long and unexpected story of Fair Isaac and Company Inc., from its custom work with industrial finance companies in the middle of the last century, to the pivotal role of the FICO system in the creation of subprime mortgage securities. The research presents a detailed case study of this early Silicon Valley outfit which introduced data analytics to consumer finance long before the days of big data, fintech and startups. The research demonstrates how, beyond the wildest dreams of most academic economists, a relatively small tech company engineered the information infrastructure of America’s credit markets. The completed book will contribute to business history, the history of post-war technology, and the history of modern finance. Perhaps more importantly, this is also a work of contemporary social history that sheds light on the impact of proprietary forms of data analysis on everyday consumer experience.