The Web Of Wires Behind Your Credit Fate

Like most Americans, Lewis Hobgood and his wife Dina Skinner can't live without their credit cards.

"I use credit probably everyday," Skinner tells CBS News correspondent Anthony Mason

"It's just becoming such a way of life, you know," adds Hobgood.

And as we all try to keep track of all of our spending, the debt industry is keeping track of us.

A corridor in a Minneapolis office building leads to the heart of the most sophisticated credit system in the world. It's a heavily guarded web of wires where your "FICO" score is calculated. Named for the Fair Isaac Corporation which created it, the three-digit number is used by banks, credit card companies and mortgage lenders to determine whether you can get a loan and what interest rate you'll pay.

The information there includes transactions you've made, loans you have and whether you are on time.

Drawing data from the three major credit bureaus, the system processes literally billions of bits of your financial information - like how much you owe and whether you're maxed out on your credit cards.

"So if you're a lender today, you can get instantaneous information about the credit worthiness - or the viability of a consumer's ability to pay back a loan," says FICO's Lisa Nelson.

The speed of that technology has eliminated your local bank officer and allowed the credit markets to explode.

"And when we saw that start to happen, we said, 'oh this is bigger than we ever imagined,'" says mathematician Larry Rosenberger.

Rosenberger, using analysis that showed human behavior tends to be consistent over time, helped develop the FICO scores back in 1989.

"They're not perfect, but they work with a level of precision that can't be gotten any other way," he says.

The major credit card companies use the scores to judge hundreds of millions of customers - to decide whether to raise your interest rate, or even close your account.

"It's a very controversial topic," says credit expert John Ulzheimer. "Most large credit issuers will grade their customers once a month. The majority of the time, the customer has no clue it's being done."

But you can find out your score just by going to myFICO.com. It will range between 300 and 850, with anything over 750 considered healthy.

"What you calculate here has a lot of impact on people's lives," Mason tells FICO's Nelson.

"Yeah, it does," says Nelson. "On their financial lives at least."

And it has made debt a booming business.

  • Anthony Mason

    CBS News senior business and economics correspondent; Co-host, "CBS This Morning: Saturday"