The History Behind The Credit Scores

By Author: Patricia Hayden
Total Articles: 3
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You're certainly not alone if you don't understand credit scores. Plenty of Americans puzzle over how to navigate the modern credit industry when they seek to get a loan or other forms of credit. Sadly things can be highly confusing if you cannot understand the functioning of a credit score. Besides, knowledge is power, and the more you know about the functionality of the credit industry, the better you can manage the credit score and, in turn, write the financial destiny.

While credit card collection agency Georgia won't take you for a history tour, we'll definitely let our readers know how to help better understand the credit score or why it does not even exist in the first place.

Credit affects many areas of your life. Moreover, it determines whether you can get a loan or not. Likewise, some jobs may periodically pull the credit file to see how the performance is.

The Beginning

Before the initiation of the modern credit industry, times were far more straightforward. You could simply walk to a bar and grab items on your tab based solely on your reputation. In rural areas of Georgia, most ...
... people knew each other. Now, this was an easy kind of early form of the credit system. Moreover, it was a kind of honor system where people kept each other in check. Likewise, those who tended not to pay their debts had a reputation business owners were well aware of.

Obviously, as an outsider, it was quite a struggle to get credit. As a result, it was essential for people who wanted to rise ahead to settle in a specific area and establish a well-known reputation.

Changes

With the population growing and people moving, the word-of-mouth credit system didn't really work anymore. Moreover, the sheer volume of credit applications increased, and it was practically impossible to depend on neighbors or other community members to acknowledge the reputation.

Besides, the newer bankruptcy laws in North America were another challenge that led to credit score development. As of now, credit card collection agency Georgia highly recommends running credit score in order to offer credit to an individual or a business.

Mercantile Agency

One of the earliest standardized credit systems sprung in the U.S. in 1841. Also known as Mercantile Agency, Lewis Tappan, a businessman, dreamt of it due to the significant financial damage due to the 1837 depression.

Moreover, extending too much credit to their customers was the sole reason behind the depression. The idea here was to mine information throughout the U.S. with the help of informants. Further, this information was stored in a ledger in New York City.

While this led to much information being difficult to interpret, besides the report showed that some applicants had conflicting information too. But things changed their direction when it hammered a new way of credit reporting in 1864. Moreover, private companies were now gathering all kinds of information about commercial borrowers of credit

This was further pooled into reports that creditors could pay to access. Since then, the process of commercial credit rating was now an essential part of the credit gameplay.