“Credit is the vital air of the system of modern
commerce. It has done more — a thousand times more — to enrich nations than all the mines of all the world.”

— Daniel Webster, 1834

In the first half of the 1800s, the American economy embarked on a long, slow transition from a system in which most goods and services were produced for household consumption or local sale to an economy in which commodities were produced for a larger regional or even global market.

The emergence of the market economy created problems of information that threatened to derail traditional credit practices. The key problem was one of distance. When traders did business primarily with family and neighbors, they could rely on personal knowledge when assessing an individual’s credit worthiness. As trading relationships extended over greater distances, personal connections were not always available. Yet, as every merchant knew, restricting business to known customers was no way to grow a company. The solution to this problem was the new industry of credit reporting. 10

10 Rowena Olegario, A Culture of Credit: Embedding Trust and Transparency in American Business (Cambridge, Mass.: Harvard University Press, 2006).