#79 1841 · Mercantile Agency (later Dun & Bradstreet) · Credit reporting
Lewis Tappan sold ledgers of who could be trusted, a century before databases
the problem
Lending to merchants you had never met
background
Lewis Tappan had been burned in the Panic of 1837, a depression triggered by merchants extending credit on nothing firmer than a handshake and a neighbour's word. American commerce ran on exactly that: a wholesaler in New York deciding whether to ship goods on credit to a merchant in Ohio he had never met, based on whatever a mutual acquaintance happened to say.
In 1841 Tappan replaced word-of-mouth with a network of paid correspondents — attorneys, ministers, fellow abolitionists — who submitted written reports on local merchants' character and finances twice a year, distilled into leather-bound ledgers subscribers could consult in his New York office. His antislavery reputation cost him: it made him unwelcome with potential correspondents across the South, confining the network mostly to Free States.
the move
Lewis Tappan sold subscriptions to a ledger of merchants' creditworthiness gathered from correspondents across the US.
the payoff
Turned trust into an institution a century before databases; the ancestor of every credit bureau.
what came after
The agency had 280 subscribing clients by 1844 and branch offices in Boston, Philadelphia and Baltimore; renamed R.G. Dun and Company in 1864, it developed an alphanumeric rating system used into the twentieth century, and merged with rival Bradstreet during the Great Depression to form Dun & Bradstreet. The early reports were openly subjective and often prejudiced by reporters' views on race, religion and class — a flaw that eventually pushed the industry toward standardized, then computerized, credit scoring, culminating in FICO becoming the norm by the 1980s.
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references
- [1]Your Credit Score's Long History, From Espionage to AlgorithmsTIME, 2015time.com
- [2]The Mercantile Agency: A Curious Relationship of Credit Reporting and AbolitionismAmistad Research Center, 2021amistadresearchcenter.org