The history of money is a history of credit. While many people believe money was created to make a cumbersome barter system easier to navigate, Felix Martin debunks that theory in his book, Money: The Unauthorized Biography, writing: ”…currency is not itself money. Money is the system of credit accounts and the clearing that currency represents.” 

And the history of credit is deeply intertwined with the history of business credit. Several thousands of years ago, for example, farmers borrowed to plant seeds and repay them later.  These business loans were an early example of lending, and credit to small businesses has been key to economic expansion ever since. 

In an 1834 speech, the U.S. Senator Daniel Webster said, “Commercial credit…is the vital air of the system…. It has done more, a thousand times more, to enrich nations, than all the mines of the world.”

Here’s a brief overview of the history of business credit, along with ways you can leverage credit today. 

The Early Days of Business Credit  

“The United States is a nation built on credit, both public and private,” writes  Rowena Olegario in The History of Credit in America. “Throughout the colonial period, British merchants provided the credit that fueled trade between England, Scotland, and the American colonies.” 

Credit bureaus helped to facilitate lending by helping creditors evaluate prospective borrowers. In the US, one of the earliest credit bureaus was the Mercantile Agency, founded by Lewis Tappan . A few years later, the John M. Bradstreet Company was founded. It popularized credit ratings by publishing the first book of commercial ratings. 

Meanwhile, a rival firm, The R.G. Dun & Company, led by Robert Graham Dun expanded across the US and then internationally. 

As an article in the Harvard Business Review explains, “Starting in the 1840s, the Mercantile Agency (later R.G. Dun & Company) sent reporters into the field to collect information on businesses’ creditworthiness. The data was compiled into enormous ledgers and then condensed and distributed in the form of enormous ‘Reference Books.’ In-depth evaluations were available only to subscribers of the credit service.”

Those two firms merged in 1933 to form Dun & Bradstreet, as this history of Dun & Bradstreet explains. 

Experian traces its beginnings to London in the first half of the 19th century, where an association of merchants, the Manchester Guardian Society,  shared information about customers. In the US, Jim Chilton founded the Merchants Credit Association in 1897. It was later acquired by TRW Inc., which was then acquired by Experian in 1996. 

Equifax was founded in 1899 as Retail Credit Company in Atlanta. It sold a book of credit references for grocers, and then expanded services to retailers and insurance companies. It changed its name to Equifax in 1979. The Equifax Small Business Enterprise was formed to focus on commercial credit reports. 

What Has Been the Impact of Historical Events on Business Credit

Key developments in the modern credit system in the US include: 

The growth and establishment of merchant credit. “Merchants were a key source of both long-term and short-term credit to other businesses throughout the nineteenth century,“ writes Mary Eschelbach Hansen in Sources of Credit and the Extent of the Credit Market: A View from Bankruptcy Records in Mississippi 1929-1936.

In the mid-19th century in the US, bank credit grew at “significantly higher levels than in other countries,” while “trade credit of nearly $2.3 billion comprised almost half of the nation’s entire GDP of around $4.1 billion,” according to Olegario. 

Communications and computing expanded the reach of credit reporting agencies in the 19th and 20th centuries. Postal systems, the telegraph, the telephone and then computerization made credit decisions faster and easier and helped facilitate the expansion of credit. 

In the early 20th century, firms began factoring accounts receivables and “by the end of the 1950s there were approximately 400 companies specializing in factoring activities,” writes Olegario. 

In 1934, the Reconstruction Finance Corporation (RFC) began to lend money to businesses and victims of disasters, either directly or through private lenders. 

 In 1950 Frank X. McNamara created the Diners Club Card, the first credit card. This was followed by the BankAmericard offered by Bank of America and the American Express Card, both launched in 1958. Today more than 161 million Americans have credit cards, according to Transunion.  

In 1953, President Eisenhower President Eisenhower signed the Small Business Act of 1953, and it created the new Small Business Administration (SBA). “For the first time a single agency had for its primary mission the promotion and protection of small business,” according to the SBA Office of Advocacy. 

In 1956 mathematician Earl Issac and engineer Bill Fair founded the Fair Isaac Co in 1958 created the first credit scoring system. In 1981 it launched the first FICO credit bureau risk score. 

In 1970 the Fair Credit Reporting Act, a law that regulates consumer credit reporting, was passed. It was updated with the Fair and Accurate Credit Transactions (FACT) Act of 2004. Among other things, that law mandated free credit reports which are available to consumers (not small businesses) through AnnualCreditReport.com. 

In 2001, the Small Business Financial Exchange was established as a business data exchange governed by the small business lending industry and managed independently from credit reporting agencies.

In 2006, VantageScore, a consumer credit scoring model, was introduced by the three major credit bureaus: Equifax, Experian and Transunion as an alternative to FICO scores. 

The Power of Business Credit in Today’s Market  

Today business credit agencies are found around the world. Business credit data helps facilitate small business loans, equipment loans and financing, trade credit, and more. Here are some key milestones reported by bureaus operating in this industry: 

• Experian operates from 32 countries in four regions around the world. 
• Equifax has files on 33+ million businesses with credit data, and 127 million global business records for marketing. 
• Dun & Bradstreet covers more than 190 countries and markets. 
• The SBFE  now has more than 98 million accounts represented in data from over 135 members. 

FICO has offices around the world, and more than 100 billion FICO® Scores have been sold to date. FICO also offers the FICO SBSS score, a credit score developed for small business decisions. 

VantageScore consumer credit scores have gained traction over the years and, according to the company, are now used by “thousands of lenders, landlords, utility companies, telecom companies, including nine of the top ten largest banks and many others to determine creditworthiness.”

How To Use History To Build and Manage Business Credit for Success in 2024  

Credit continues to fuel business growth worldwide. The most basic form of credit, trade and supplier credit, continues to be a vital type of credit for many businesses. Today there is a wide variety of financing options available, ranging from microloans to SBA loans to large commercial loans. 

Business credit scores make it faster and easier for credit card issuers and other lenders to make credit decisions. That also means it can make it faster and easier to get small business financing. 

Business owners can build credit for their business, and with good credit can find a wider range of credit and business opportunities. 

FAQs 

How Can I Check My Business Credit Score?

Free business credit reports aren’t required by law. You can purchase business credit reports from major business bureaus. Nav offers a cost effective solution that lets you check and monitor your business credit from multiple credit bureaus. 

With Nav Prime™, the paid offering, you’ll business credit scores* and Detailed Credit Reports from two leading business credit reporting agencies: Equifax® and Experian™, along with business credit scores Equifax® Business Delinquency Score® and  Experian™ Intelliscore Plus^SM V2. 

Personal credit is also important to lenders, and with Nav Prime you’ll get personal credit scores and detailed reports from  Experian™ and TransUnion®. Scores provided are the TransUnion® VantageScore® 3.0, and Experian™ VantageScore® 3.0. 

What Are the Benefits of Good Business Credit?

Good business credit can help business owners qualify for a wider variety of small business financing options, and may help businesses qualify for lower interest rates and/or higher credit limits. 

 Suppliers or vendors may also review business credit when offering payment terms (such as net-30 terms).

Some insurance companies review business credit reports.

And some businesses review business credit reports when deciding whether to work with other businesses, or to enter partnerships. 

How Long Does It Take to Build Business Credit?

Payment history is the most important factor in business credit scoring models. To build strong credit, businesses need to have a track record of accounts—known as tradelines—paid on time. 

Tradelines can include net-30 accounts, business credit card accounts, small business loans.

Learn how to establish business credit. 

Business owners who get tradelines that report to business credit, pay them on time, and keep debt low, often see results in several months to the first year. Your results may vary. 

What Is the Difference Between Personal and Business Credit?

Personal credit refers to credit used for consumer (household) purchases, including personal loans, auto loans, student loans and home mortgages. 

Business credit refers to credit used by businesses for business purposes. These can include small business loans, business lines of credit, business credit cards, equipment financing and more. 

*Nav provides access to Experian™ Intelliscore PlusSM V2, Equifax® Business Delinquency Score®, TransUnion®VantageScore® 3.0, and Experian™ VantageScore® 3.0. VantageScore is a registered trademark of VantageScore, LLC.