BRIEF HISTORY OF CREDIT
 
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BRIEF HISTORY OF CREDIT

Compiled by John J. Hudock, Founder and President of the World of Credit.  John has been compiling this information since 1998. You may contact him at woc@epix.net

The practice of credit probably corresponds to when man began to communicate. The earliest I could conform was about 4000 years ago and the reference was to interest rate. Thousands of years ago the leaders were concerned as to what excess interest would do to the economy.

1950 BC
One of the first recorded references to credit - the King of Eshnunna (east bank of the Tigris) decreed a limit on amount of interest - 20% - and allowed borrowers grain and goods for loans made in silver.

1763 BC
Hammurabi - King of Babylon (Code of Hammurabi) also limited interest to 20%. A borrower could also sell his wife, son or daughter into slavery to settle debt. He added protection for those sold indentureship to three years - in the fourth year they would be given their freedom.

630 BC
Lydia - The first coins appeared in this small kingdom which was between the Black and Mediterranean Seas. The coins were oval minted - stamped with the image of a lion's head. The lion's head image guaranteed the coins were genuine.

269 BC
Rome - Silver coins were first minted, called denarii. They were minted and circulated to make Rome a wealthy city.

1215
Italy - Modern banking developed in northern Italy. The first bankers were money changers sitting on small benches in the market place. The word 'bank' is derived from the Italian word for 'bench' - 'banco'.

1780
George Washington's Yorktown campaign is financed with a loan arranged by Robert Morris, who is later imprisoned for land-speculation debts.

1800
The first U.S. bankruptcy law is adopted in response to losses suffered by land speculators; voluntary bankruptcy filings are not allowed until 1841.

1812
New York's Cowperthwaite & Sons begins selling furniture on "installment," allowing consumers to take items home while paying them off over time. Competitors soon follow suit.

1828
New York - Pawnbrokers began offering collateral loans. Open-book credit was used to purchase inexpensive items such as food and clothing. These items would be paid for 'bit by bit' as buyers could afford to.

1856
I.M. Singer & Co. launches an installment-selling campaign allowing "suitable" buyers to take home a sewing machine for $5.00 down and monthly payments for the balance, plus interest.

1857
In response to scandals and corruption involving loan sharks, remedial loan societies are created to extend credit to small borrowers.

1870
Chicago - The first small-loan company opened. It provided cash while charging extremely high interest rates. For the next 40 years loan company activity grew and so did their interest rates. Because of this Lawmakers passed legislation allowing formation of "Credit Unions"

1889
Installment plans - the term is listed in a dictionary for the first time. The definition warns that merchants can repossess goods "if the buyer makes default in any installment."

1899
Catorand Guy Woolford opened Retail Credit Company in Atlanta, Ga. which later became Equifax, the first national credit bureau in the United States.

1900
Canada - First credit union organized in North America.

1903
Department store charge cards were introduced to be used for luxury goods. The cards were convenient because people did not have to carry large amounts of money. Also at this time automobile sales increased - the cars being purchased with credit.

1909
Credit unions begin to appear in the United States

1910
The Sears catalog decries the "folly" of buying on credit. A year later, Sears abandons its cash-only policy and starts installment selling for fear of losing "default in any installment."

1914
Western Union and some department stores issue the nation's first type of charge cards, letting people pay for purchases at month's end.

1919
General Motors launches the General Motors Acceptance Corp. to help buyers finance car purchases. Ford waits until 1928 to counter to gain market share.

1920
The modern credit card makings were here. Oil companies had offered charge cards that could be used nationwide. Auto buying habits indicated that buying on time would be 'acceptable'.

1924
Three of every four automobiles purchased in the United States are purchased on credit. These loans make up more than half of all retail installment sales.

1928
Credit Plus started as credit bureau Del Mar Va, It was purchased by Steve Grants in 1980 and changed the name to Credit Plus in 1998 ?

1945
In Europe, millions of people used cigarettes, chocolate and chewing gum which were gifts from U.S. soldiers to barter in place of the money they did not have.

1946
Formation of Informative Research. Headquartered in Garden Grove, CA. it is a privately held information provider, servicing the mortgage lending industry. It is one of the top ten credit resellers in the U.S.

1949
New York City - The 'modern day' credit card came to existence in a restaurant where three men were having lunch - they started the "Diners Club" card.

1950
The Diners' Club introduces its travel and entertainment card, the first card that can be used at more than one retail establishment.

1956
FICO - Fair Isaac Company -- Founded by Bill Fair & Earl Isaac. They developed a scoring system using a combination of item scoring, factoring & segmentation - which can predict an individuals potential credit default risk MATHEMATICALLY

1958
American Express introduces their new charge card. Bank of America mails the first 60,000 "Bank-Americards" to Fresno, Calif., residents.

1966
Bank of America begins licensing BankAmericard to other banks. Rival banks respond by forming the Master charge group.

1968
TransUnion was created by the Union Tank Car Company, a railcar leasing operation, which became the parent holding company.

1969
TransUnion acquired the Credit Bureau of Cook County (CBCC). At that time, the Bureau manually maintained 3.6 million card files in 400 seven-drawer cabinets.

1970
President Nixon bans mass mailings of unsolicited credit cards, forcing banks to ask customers if they actually want a card before delivering one.
FICO develops the first scoring system for a bank credit card of Connecticut Bank and Trust.
The Federal Trade Commission (FTC) enacts the Fair Credit Reporting Act (FCRA), 15 U.S.C. ' 1681 et seq

1976
Bank Americard becomes Visa.

1986
Sears launches the Discover Card, offering cards to all Sears Card holders.

1989
FICO installs the first general-purpose FICO scoring system at Equifax named BEACON.

1991
FICO begins their risk scoring system at all three national credit Bureaus. - BEACON (sm) at Equifax, EMPIRICA' at Trans Union, and the Experian/Fair Isaac model at Experian.

1994
The Mortgage Press begins publishing - The Mortgage Press, LTD. has 36 monthly publications targeting the mortgage industry. professionals and serves as the official journal of the state affiliate of The National Association of Mortgage Brokers (NAMB).

1995
For the first time in U.S. history, credit cards overtake cash payments for consumer purchases.

1997
Russia - Licenses for elk hunting permits were used to pay public employees because the opportunity to hunt for food was more valuable to them than money.

1999
The International Credit Club - established - W-B Pa. for the purpose of improving credit scores for purchasing and refinancing properties. Evolved into web based interfaced mortgage pre qualification program.

2001
The WORLD of CREDIT Inc. totally corporate funded Non Profit Origination providing FREE credit services including a personal debt management program

2003
George W. Bush signs H.R. 2622, the Fair and Accurate Credit Transactions Act of 2003



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Jan. 1947 - Total Revolving / Non-revolving credit -- 68 billion

Jan. 2001 - Outstanding consumer debt credit tops -- 1.5 trillion

Jan. 2002 - Outstanding consumer debt credit tops -- 2.1 trillion



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SOURCES -- FEDERAL RESERVE DATA / JEROME LEVY - FTC

ECONOMICS INSTITUTE, MANY WEBSITES and U.S. News & WORLD REPORT

This brief credit history contains information from many sources. It is intended to illustrate the History of Credit as interpreted by John J. Hudock - from the first known record to the present highlighting dates and other events he considered interesting.


 

About the ICFE:

The Institute of Consumer Financial Education (ICFE) was founded in 1982 by the late Loren Dunton (creator of the Certified Financial Planner (CFP) designation).  The ICFE is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely. 
The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and Resources. It publishes the Do-It-Yourself Credit File correction Guide, which is updated annually. The ICFE has distributed over one million Credit/Debit Card Warning Labels and Credit/Debit Card Sleeves world wide.

The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.The ICFE was an active partner in the California Student Debt Resource Awareness Project (CASDRAP) which resulted in a new web site: (studentdebthelp.org).  CASDRAP disbanded in 2010, shortly after the web site project was completed.  In 2011 the ICFE assumed the single sponsorship of the (studentdebthelp.org) web site and is now responsible for its content and operation.

The ICFE is also an on-line help for consumers who spend too much.  ICFE's spending help was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from the ICFE's Money Instruction Book, our course in personal finance.

Visit the ICFE's other web sites at: www.financial-education-icfe.org and studentdebthelp.org.  Both sites helps consumers and students with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and how to teach children about money. Other ICFE services include: Ask Mr. G,  a free eNews, and an online resource center for students, parents and educators, plus financial education learning tools and a book store.

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