The ratings are very condensed conclusions as to the capital and net worth of the party, after deductions for depreciation, etc., and as to the grade of credit title of the party as reflected by his past record, business ability, and business prospects. These ratings are published quarterly in books which are loaned to subscribers; the names are arranged by states, cities, or other municipal districts, and alphabetically; the ratings are given for about two million names, and, to save space and serve conven ience, are given in symbols.
The ratings of Dun's, Bradstreet's, and other commercial agencies are rather to be considered as indexes to the contents of the reports and cannot be trusted exclusively. They are subject to frequent revision, and the bank credit man's analysis and estimate of the credit data may differ radically from that of the agency's opinion. The ratings are useful as checks and com parisons; the change of an agency rating may suggest a reinvesti gation of the name; and they serve, in case the department has no other data, in cases where information is desired quickly.
Whereas the general agency aims at comprehensiveness, covering the world and all lines, it is necessarily slower in getting out reports and bringing them up to date and is more expensive than special agencies organized to render special services, in a few lines of industry, over a more limited territory. These special agencies vary so widely in their activities that it is beyond the compass of this chapter to describe them.
3. Interchange of Credit Experience A third source of credit information is the direct interchange of credit experience with a common customer between members of the trade, and between members of the trade and the bank, and between the banks. The bank credit man is interested only in the latter two. Credit interchange is one feature of the larger business movement in co-operative competition, and when fully adopted gives credit information of a most thorough and excellent kind, and by it undesirable customers in banking and commercial lines can be most effectively eliminated.
Credits extended by the bank bear an intimate relation to credits extended to and by the merchant or manufacturer; where a merchant procures credit from both the bank and the trade, if his credit standing is impaired at either, the other is adversely affected. For this reason the bank is anxious to know whether its customers are maintaining good credit reputations in their trade, and to this end frankly asks members of the trade who have deal ings with the bank's customers for their ledger experiences and opinions regarding those customers. On the other hand, the members of the trade appreciate knowing the standing of the customers at the bank.
Usually the information given by the trade to banks is fuller and franker than that given by banks to the trade. Banks are
very reluctant to disclose detailed credit information about their customers. Banks argue that since they work on a very narrow margin of profit and lend in larger amounts and to fewer members of the trade than is common among members of the trade itself, and lend both their own and their customers' funds, it is necessary that they safeguard themselves more than members of the trade must; accordingly they enter into very confidential relations with their borrowers and have private information, to communicate which would be a violation of confidence. Moreover, they con tend that they take precautions by way of collateral guaranty and indorsement as security, which facts would be misunderstood by the outside trade to mean that the bank regarded the customer as a bad credit risk.
The banks are tending, however, to interchange credit data with the trade more freely and fully, particularly as between their own customers. The banks are also tending to interchange data with one another more freely and fully, but not to the degree that is done between members of a trade.
4. Credit Exchange Bureaus In addition to replies to direct queries about a member of the trade, the trades have organized credit exchange bureaus to facili tate the interchange of credit information among their respective members. The local credit men in a city or other area often es tablish such bureaus; the various groups (members of a trade or kindred trades) of the National Association of Credit Men operate such interchange bureaus; but the most of them are operated by the trade associations.
The methods employed by these bureaus vary widely, but the principle is that through co-operation greater economy of expense and completeness of information may be attained. The bureau acts as a clearing house of information and is not intended to supplant but to supplement direct interchange between members. The bureau may report to a requesting member all information which passes through it pertaining to a list of members who are his customers; hence, it reaches its maximum utility and efficiency when it includes in its membership all the possible creditors of a member, that is, when it includes the whole trade. Most of these bureaus are local; the Credit Monthly of the National Association of Credit Men lists 54 interchange bureaus (September, 192o) conducted by local credit men's associations, most of which participate in the Central Credit Interchange Bureau, located in St. Louis and established in 1916. The only other institution which attempts to clear credit information on a national basis is the Credit Clearing House which assembles and distributes ledger information as between its half-million retailer members.