Credit scores: From trade ledgers to consumers’ financial power

While debt is still widely considered as a negative in the country, recent data shows that Filipinos are slowly warming up to the idea of credit cards and increasing their credit scores. According to the data analytics firm GlobalData’s Payment Cards Analytics, total card payment value in the Philippines rose by 18.8% to reach P4.2 trillion in 2025 from P3.5 trillion in 2024. Additionally, reports from the Credit Card Association of the Philippines reveal that there are over 18 million outstanding credit cards as of the fourth quarter of 2025.

For these nearly 20 million Filipinos, one statistic that accompanies them in their credit card journey is their credit score. Understanding the concept of the credit score may seem complicated at the onset. However, at its core, a credit score is simply a reflection of the user’s financial behavior.

These three-digit numbers are usually based on the credit card owner’s credit report. These reports are summaries of one’s financial transactions submitted to the Credit Information Corp. (CIC), containing an individual’s basic information as well as their loan contracts with lending institutions, utility subscriptions, and other obligations which the CIC is authorized to collect.

Derived from these reports is one’s credit score, which is calculated by accredited credit bureaus that receive data from the CIC. These bureaus use proprietary scoring models, which vary depending on the bureau, to analyze an individual’s financial behavior and then generate a three-digit score that represents overall creditworthiness.

To better understand how today’s credit score came to be, it is important to look back at the origins of credit evaluation itself. Long before algorithms and centralized databases, systems of assessing creditworthiness were far more manual, subjective, and rooted in commercial trade.

Before there was credit scoring, there was commercial credit reporting. The commercial reports were calculated and worked similarly to how modern-day credit reports work, with the only difference being that they focused on evaluating businesses rather than individual consumers.

Mercantile agencies, or what used to be credit bureaus, relied on correspondents to gather detailed, and often subjective, information about borrowers, which was then compiled into centralized records that were then utilized as the basis for commercial reports.

Over time, as mass retail and installment-based purchasing grew in the late 19th century, the need to evaluate individual consumers led to the rise of consumer credit reporting. From these early, decentralized and subjective practices, the system gradually evolved into the more standardized and data-driven credit bureaus we recognize today.

Likewise, the shift toward modern credit scoring accelerated in the 1960s, when credit reporting became computerized, and thousands of local bureaus began consolidating into a few major players. Much like most industries since the invention of the computer, records moved from paper files to digital systems, and data became easier to standardize, share, and analyze at scale.

While lenders were initially hesitant to replace subjective evaluations, the introduction of standardized scoring models helped transform credit assessment into a more consistent and widely adopted system. By the 1990s, trusted institutions began requiring these scores for mortgage applications, and ever since, credit scoring has become a necessity for credit card owners in financial decision-making.

In the Philippines today, credit bureaus calculate credit scores based on five distinct criteria: credit payment history, the amount owed or credit utilization ratio, length of credit history, types of credit used, and new credit. These factors impact the scores in their own ways but collectively dictate one’s creditworthiness in the eyes of financial institutions.

Credit payment history is often considered the most influential factor. It reflects how consistently a borrower meets their payment obligations, whether it be paying bills on time, how frequently they pay their amount due, or even missed or delayed payments. In simple terms, it is a track record of payments that signals reliability or unreliability.

The amount owed, commonly referred to as the credit utilization ratio, measures how much of a person’s available credit is being used. Keeping utilization at a manageable level shows that a borrower is using credit responsibly without overextending.

The length of credit history includes the age of the oldest account, the newest account, and the average age across all accounts. This criterion can provide more data for lenders to assess behavior, often resulting in a more thorough evaluation.

Types of credit used, or credit mix, considers the variety of financial products a borrower has handled and demonstrates financial flexibility and discipline, which can positively impact a score.

Finally, new credit reflects how frequently a person applies for or opens new credit accounts. While taking on new credit is not inherently negative, multiple applications within a short period may signal higher risk to lenders.

As credit becomes more embedded in everyday financial life, understanding how credit scores work empowers Filipinos to make smarter, more informed decisions about borrowing and spending. Ultimately, knowing what credit scores are is one step closer to a tool that, when managed well, can open doors to greater financial opportunities and stability. — Jomarc Angelo M. Corpuz