SOURCES OF CREDIT INFORMATION 1. Importance of complete information.—If the credit-giver were always in possession of all the facts that bear upon the credit-seeker's condition, he would make few errors in estimating the latter's credit title. It is because the information at hand is often incom plete and at times actually misleading that credit frequently is granted to a person, firm or corporation not rightly entitled thereto. It follows that the more complete and specific such information is, the less like lihood is there of making mistakes. The capable credit man neglects no opportunity to inform himself as fully as possible regarding the credit-seeker's actual condition, financial and otherwise, as far as this re lates to his credit title.
The value of the credit information obtained must of course always be considered in connection with the sources from which it comes. Accordingly, what the credit-seeker says about himself must be viewed in a somewhat different light from that in which the re port of an impartial third party is regarded. In the former case, there is always reason to believe that the information will reflect a too optimistic view of the credit-seeker's condition. It is hardly to be expected, of course, that a merchant who seeks credit favors should of his own accord furnish information about himself that might defeat his immediate object. Under the circumstances, it will not be surprising if certain facts are withheld or certain assets given a valuation somewhat in excess of their current market value. Due allowance must be made for this tend envy.
2. Overestimating the value of references.—For the same reason it is practically certain that a person or house given as reference has been furnished ample cause for giving the credit-seeker a "clean bill of health" as a credit risk. Obviously, such reference would not have been given unless it were known in advance that the information would be favorable. It often happens that a scheming dealer in order to ob tain a large amount of goods on credit establishes himself in the confidence of one or two well-known concerns, paying his bills promptly and otherwise act ing the part of a model customer. Such concerns can
only bear testimony to their satisfactory business re lations with this customer. If the credit man is sat isfied to go no further in his search for information, he may discover before long that he has been playing right into the hand of a clever swindler and that he has surrendered his firm's goods to one who has no intention Whatever of paying for them.
3. Five important sources of credit information.— There are several important sources of credit informa tion available to the credit man of a wholesale or manu facturing house. These may be enumerated as fol lows: 1. Information furnished by the credit-seeker, usu ally in the form of a financial statement or, as it is sometimes called, a property statement.
2. Information furnished by mercantile agencies in the form of periodically revised rating books, weekly or monthly information sheets and special re ports.
3. Corroborative information obtained from local banks, resident attorneys and similar sources.
4. Information obtained from houses selling the same trade, spoken of as exchange of ledger informa tion or credit clearing.
5. Information obtained from representatives of the selling house. (Salesmen's reports.) 4. Property statement; a basic consideration.— There is one consideration in connection with the giv ing of credit that deserves to be constantly kept in view, namely, that the wholesaler who extends credit to a retailer becomes in a certain sense the latter's partner. He places in the retailer's hands without receiving an immediate equivalent valuable merchan dise to be resold by the retailer to the ultimate con sumer. The profits of both wholesaler and retailer are dependent upon such resale. Accordingly, the manufacturer or wholesaler is just as desirous of find ing an outlet for his goods thrd the retailer as the latter is to obtain possession of them for purposes of profit thru resale.