How Credit Reports Came To Be

Have you ever wondered how this credit reports business came to be

? Even during the early days, people were not immune to credit. However, the system was somewhat different from today. Whenever a person bought things on credit the store clerk would write the purchase down and put in a paper tube worn on their wrist called a "cuff." Soon enough, someone came up with the idea of collecting all these information on clerks' cuffs and putting them together. This way, merchants would have something to refer to before granting credit.

This system of collecting data is not as efficient because only bad information was collected. Much like the today's reports, a person's references, employment information, insurance information, and even driving records were included in the data. There was no way of verifying the information recorded and the customer is clueless on the information. Unlike today where people can view credit report, people had no way of knowing the origin of the information recorded about them. The information recorded was only accessible to merchants and lenders.

Both ends suffered from this system though. As much as the customer had no access to the record of information about him or her, businessmen found the system inefficient for their businesses be safe from debt. Lenders and merchants are doing what is similar to creditors who do credit scoring today as they were the only ones who have these information and were known as "mutual protection societies" and "roundtables." Their scope were only limited to certain distances or places.

It was in the 1830s that the first third-party credit reporting agencies were established to solve the problem geographical limitation. There scope was now national and are similar to how modern-day franchise functions. Their offices were a network across the country. Credit reports were now accessible to anyone but it also involves a fee. Exchanges of information among different locations were utilized with each branch agency paying a percentage of their profits to their central Credit Reporting Agency (CRA).

Finally, when the typewriter was invented in the 1870s things became more efficient. Everyone can now view credit report information that are more widely available, more accurate and covered much larger geographical cope. The new CRAs effectively deal with their subscribers, the consumers and businesses about which they prepare reports for, their correspondents in their branch offices, and the general public. As more advanced technologies developed, CRAs became more efficient and organized aiming to run things more effectively for everyone who rely on the reports they prepare.

by: Leo Chu

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