Where Did Credit Reports Come From?

We may be in an age of Big Data, but collecting information on consumers is nothing new. Credit reporting goes back to the late 1800s, when it was just a couple of guys going from door to door, asking merchants to describe the customers who had credit at their stores. The technical, sometimes-long files we now know as credit reports started out as a few notes in a ledger that said something like, “Reliable,” “Slow to repay” or “Won’t pay, but father will cover debt.”

For the past several decades, credit reporting has become increasingly automated and complex, but it started as a much simpler idea. Two brothers from Maryland were some of the first in the business of credit reporting (if not the founders of it). Cator and Guy Woolford started the Retail Credit Co. in 1899 in Atlanta, where they collected sellers’ comments on their customers’ payment habits, compiled them into “The Merchant’s Guide” and sold it for $25, according to an article in the online New Georgia Encyclopedia. They also offered individual credit reports.

The brothers found success, and their company grew for the next several decades, along with other credit reporting agencies. When credit reporting used computer power for the first time in the 1960s, it became a truly national business, according to a history posted to Experian’s website, and in 1970, Congress passed the Fair Credit Reporting Act and instituted regulation of the consumer reporting industry.

Decades later, the process is still improving, and the Consumer Financial Protection Bureau (CFPB) has started to investigate and regulate credit reporting agencies. The three major credit bureaus are Experian, TransUnion and Equifax — Retail Credit Co. was renamed Equifax in the ’70s — but there are dozens of consumer reports out there that record all sorts of trackable data beyond your credit.

For the moment, the CFPB is seemingly focused on the difficulty consumers face when trying to correct errors on their credit reports. During a CFPB advisory board meeting in February, CFPB Director Richard Cordray noted roughly 75% of consumer complaints about credit reporting involved problems with inaccurate information on reports, which could skew their credit scores and wrongly cause the consumer problems when applying for credit they might otherwise qualify for.

The system isn’t perfect, but that doesn’t mean consumers should ignore it. You should check your free credit reports every year and review them for accuracy — if you find anything that doesn’t belong there, you should dispute it with the credit bureau so it doesn’t hurt your credit standing. If you’re curious about how the information on your credit reports impacts your credit score, you can get a free snapshot of your credit history and how it stacks up to other Americans with a Credit.com account.