The History of Credit and the Bureau

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Mar 17th, 2008 by Kenny

Our nation is in chaos and the root of it all stems from good graces of man. Credit is deeply rooted into our history and it stems from a person’s or merchant’s product or service priced too high for the average consumer; or when payment for the item(s) was not convenient at the current time. This was the birth of the consumer credit program.

Let’s look at a typical California House priced at $395,000. The builder, in order to make a profit, needs to sell many of these homes at this price. How many of us have $395,000 to plop down in one lump sum?

If the builder only sold homes to people who could pay the lump sum, they would not sell many homes and the price would skyrocket to $3,395,000 due to the need for the builder to earn an equitable profit. On the other hand the builder would not make any profit if the homes were sold at $4000 or even $40,000.

The homes must be sold at a price that is consistent with perceived value and quality, but still needs to make it available to the average consumer. This is the reason the mortgage business is so huge.

Let’s look at another example. This trend is deeply rooted in our history. Have you ever gone to a store and realized you didn’t have the money to purchase an item? Remember asking the store clerk to put it on your account?

Actually you can still find this type of system where the merchant would allow the consumer a period of up to 30 days to repay the debt; when payment for the goods or services is not convenient.

This began back in the days of the general store where a patron would come by and pick up a few items, charge them to a personal account and the patron would agree to pay the entire account by the end of the month.

You can still find this type of environment but it’s gone for the most part replaced by the modern day credit and department store cards. This is a system designed with the theory that you never have to pay off the balance in full – the revolving credit or charge account. Pay off some and spend it to the limit.

This is where people get in to trouble everyday; from late payments piling up debt and adding stress; who needs it? As an evolution of this process, it was natural that some type of credit reporting system would be create; the dawn of the credit bureau.

Creditors or merchants were concerned about doing business with bad debtors; they needed a way to report problem consumers and a way to get the information about them before they established an account for them.

Now that the bureau had been born they began tracking information on individuals and businesses, selling that information to subscribers (creditors) and receiving information as well.