Credit histories, part of the basis of a credit score, require some judgment and training to interpret, and decisions are subjective.

Armed with FICOs, lenders gave questionable borrowers leeway, such as requiring less proof from self-employed professionals with no steady job or pay stub. The strong housing market, combined with the ability to resell almost any loan to investors, lulled lenders into a sense of complacency.

Three large credit reporting companies — Equifax, Experian and TransUnion — produce FICO scores based on their own refinements of the basic Fair Isaac system.

BIG INCENTIVE FOR SMALL CHANGES

Credit scores make a big difference and even small changes can mean real savings to consumers or much higher fees to lenders.

A $200,000 30-year fixed rate loan in California would cost a borrower with a 760 FICO $1,182 per month, or $364 less on each payment than for a borrower with a score below 620, according to myFICO.com, Fair Isaac's consumer-oriented Web site.

Boosting scores has become a booming industry. Deborah Vasile, a Cape Coral, Florida, mortgage processor who went through a recent business bankruptcy, said her credit score rose more than 100 points after she paid about $500 to Credit Repair Today of Tampa, Florida.

Considering buying a new car and a home, Vasile said she heard the service could remove bankruptcies from records before the typical seven-year posting period expires. After several derogatory items were consolidated into a single strike against her, she's now house hunting.

Elizabeth Warren, a professor at Harvard Law School, said she questions how an entire industry can be based on claims of quick fixes for a person's creditworthiness.

"If credit repair can help someone alter a FICO score for people that can pay a fee, doesn't that say that a FICO score is not a very reliable indication of a person's financial status?" she said.

HIGHER FICO, LOWER PAYMENT

As the credit-scoring system grew larger, it became more prone to errors, critics say. Credit reporting companies process some 4.5 billion pieces of data every month, and some 79 percent of consumer credit reports contain errors, according to a 2004 report by the Federation of State Public Interest Research Groups.

Congress in 1970 required that companies verify and correct incorrect information within 30 days, opening the door for a new industry of credit repair services that often hound credit bureaus to get information expunged.

The credit rating companies question the tactics used by the credit repair firms that pressure them to change credit histories.

Deborah Vasile said her credit repair service is on a fourth round of challenges on her behalf, attempting to remove the bankruptcy from her record.

Carl Jensen, owner of Credit Repair Today, said his service pushes for deletion of "derogatory items" as allowed by consumer law.

"Sometimes it's that repetition; it's just beating them down," Jensen said.

Credit-repair companies have attracted plenty of criticism themselves, and shady businesses pop up all the time since there's little barrier to entry, Jensen said.

Credit bureaus are also beginning to rule that signing up as an authorized user on someone else's credit account is not a legitimate practice, said Helayne Urban, a personal credit consultant in White Plains, New York. Experian no longer accepts such tradelines in its scoring, she said.

Meanwhile, mortgage brokers, which launch some three-quarters of all subprime home loans, are finding new ways to boost scores in a short period of time.

Ellie Mae, a private company that is the biggest provider of loan origination software for the country's 40,000 mortgage broker companies, plans to unveil the "Maximizer," a program that for $25 spits out steps a customer can take to improve a credit score to a level that meets a lender's guidelines.

In recent months, mortgage brokers have been clamoring for such tools as they struggle with tougher lending standards and a falling number of mortgages, said Mitch Freifeld, president of Branch Management Solutions in Clearwater, Florida.

Mortgage originations will likely fall by 20 percent over three years to $2.247 trillion in 2009, according to the Mortgage Bankers Association, an industry group.

SCORES LESS RELEVANT

Ideally, consumers would use suggestions from the Maximizer and credit consultants to improve their credit standing, and the higher scores would lead to more favorable loans. But Fitch Ratings suggests higher scores have become less relevant in predicting who will quit making payments.

As evidence, they point out that the average FICO score on loans that defaulted within their first year was 615 last year, just 10 points less than on loans with current payments. The gap was a better indicator in 2003, when bad loans were scoring more than 30 points less than good ones, it said.

In 2005, CreditSights, an independent credit research firm, said FICO scores have become an excuse to lead consumers into higher levels of indebtedness. Banks responded by displaying rising FICO scores as a panacea to calm concerns about future credit deterioration, the analysts said.

UNDESERVED LOANS

The companies that issue the scores defend their products and say consumers only hurt themselves by omitting valid credit information.

"It just means the consumer has an inflated credit-risk potential and may end up getting a loan they should not have had in the first place," said Stuart Pratt, president of the Consumer Data Industry Association in Washington, whose members include Fair Isaac and the three main credit reporters.

Fair Isaac Chief Executive Mark Greene staunchly defends his system, but facing what he called an "emerging sense of hysteria" in March, he asked a deputy to remind lenders to use all available information in their loan decision-making.

Some lenders may have lost faith in the system. In response to lenders' demands, Equifax, Experian and TransUnion together developed a more predictive credit score model, according to Barrett Burns, who is chief executive of VantageScore Solutions, the collaborative effort to weed out inconsistencies between the companies.

Lenders today might take a lesson from failed underwriters that may have ignored the details at their own peril.

Executives from mortgage lender New Century Financial Corp. cited FICO scores to demonstrate the quality of their mortgage loan portfolio. On May 4, 2006, for example, New Century told investors and analysts its average FICO score was 633 at the end of the first quarter of 2006, up from 600 in 2003.

"Credit performance is better than historical experience and has exceeded our expectations," the company's slide presentation said.

Eleven months later, New Century filed for bankruptcy protection.