The average American has a 714. In Tennessee, the mean is 705, compared with 692 in Georgia. A little over 1 in 100 people carries a perfect 850. Your FICO credit score, an abbreviated measure of your financial identity, affects numerous aspects of your life from mortgages and car loans to renting an apartment and buying insurance.
This seemingly impersonal but critical distillation of a person’s financial history is computed using a trove of data collected from a host of sources by the 3 major credit bureaus, which serve an important role in facilitating efficiency in lending decisions. But did you know that the birthplace of consumer credit reporting was a neighborhood grocery store in Chattanooga?
In the late 19th and early 20th centuries, credit was customarily extended by local merchants who knew their customers well or who relied upon character referrals from other customers. It was common to find local grocers operating corner markets within a limited footprint in a residential neighborhood. That began to change as greater mobility and urban expansion led to a more geographically dispersed customer base greater use of credit. Enter a trio of enterprising transplants to Chattanooga.
In 1888, a young man from rural Maryland named Cator Woolford enlisted in the nascent U.S. Weather Service, which at the time was part of the Army Signal Service. Woolford’s first duty assignment was in Chattanooga, stationed at the old county courthouse at 7th and Walnut Street. He resigned in 1891 to serve a brief stint as assistant vice president of a building and loan association.
Two years after his arrival in Chattanooga, Cator’s older brother Frank Rees Woolford also migrated south to enter the mercantile business. In 1894, Cator and Rees founded Woolford & Company, a small grocer located at the corner of Willow and Ivy Streets in the Orchard Knob neighborhood, as well as a coal delivery company on McCallie Avenue near Central in what was then considered part of Highland Park.
Extending credit to familiar patrons was common, and like most store owners, the brothers maintained a “deadbeat list” of customers to whom credit would no longer be offered. However, the expansion of their business suggested the need for a more robust method of evaluating creditworthiness, leading Cator to devise a coding system. He classified customers as prompt, medium, slow, or “requires cash”. He also periodically updated his rudimentary files as experience dictated and shared his ideas with other local merchants in the Chattanooga Retail Grocer’s Association.
In 1898, Cator Woolford was appointed chair of a committee to collect credit data from the other association members and compile a record of customers and their payment histories, which was sold to defray the costs of production. Eventually, he hired 2 full time employees to assist in the collection and sale of consumer credit information in Chattanooga.
By this point, the Woolford brothers had been joined in Chattanooga by their younger brother Thomas Guy Woolford, a newly minted attorney also engaged in the mercantile business. Recognizing a budding opportunity, Cator and Guy decamped to Atlanta in 1899 and founded the Retail Credit Company, forming alliances with the grocers in the city and collecting credit histories on slips of paper gathered by a growing network of data collectors they called “correspondents”. They published their first compilation in a bound edition called the Merchant’s Guide that sold for $25. They lost over $2,000 in the first year.
Yet before long they were off to the races. Retail Credit Company was not the first of the data collectors we refer to today as credit bureaus, but it was by far the most organized and aggressive. They soon had offices in dozens of cities, growing into the largest player in the industry and eventually expanding into providing risk assessments for the insurance industry. Their growth accelerated in the post WWII suburban era with the acceleration of consumer credit to finance homes and automobiles, and in 1965 Retail Credit became a public company.
With the advent of modern (for its time) data processing equipment, computerization of the massive stash of 3 x 5 cards loaded with customer information became a necessity, but the perceived threat to privacy was not greeted enthusiastically by the public. Furthermore, credit files of the day contained a great deal of nonfinancial information, including gossipy hearsay regarding personal behavior. The intense public resistance led to the passage of the Fair Credit Reporting Act in 1970, mandating that only relevant borrowing and repayment records were permissible, that consumers had a right to inspect their files, and that credit bureaus were obligated to correct errors.
Change did not happen overnight, and Retail Credit continued to find itself faced with allegations from the Federal Trade Commission that it had violated the Fair Credit Reporting Act and was ordered to cease compensating employees based upon the amount of negative information they collected on consumers.
Retail Credit Company changed its name to Equifax in 1975, a portmanteau of “equitable” and “factual,” in a rebranding effort to restore consumer confidence. Today Equifax employs 15,000 people in 24 countries, and holds 800 million individual credit files worldwide including 245 million in the U.S. It is one of the “big 3” credit bureaus that furnish information to lenders, landlords, insurance companies, and potential employers. The ubiquitous FICO score is computed by the Fair Isaac Corporation by applying a formula to the credit histories held by the 3 bureaus.
Cator Woolford retired in 1931 and remained a respected philanthropist in Atlanta until his death in 1944. Brother T. G. “Guy” Woolford was also active in the Atlanta community and died in 1952. Elder brother F. Rees Woolford lived out the rest of his life in Chattanooga as a coal merchant and real estate investor until his death in 1959 at age 92.
Next time you order a copy of your credit report, think about the little corner grocery store in Orchard Knob where it all started.