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The narrative and the algorithm: Genres of credit reporting from the nineteenth century to today

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  • Lipartito, Kenneth

Abstract

Credit reporting is a contested process whereby parties with distinct interests (borrowers, lenders, and intermediaries) jointly construct the form, method, and style of credit assessment. In contrast to theories that argue information should grow more secure and credit relationships more transparent over time, the conflicted struggle over representation produces different styles or “genres” of credit evaluation that are compromises between the interests of the different parties. Thus, in the United States, trade credit reporting in the nineteenth century evolved an enduring narrative reporting style, incorporating heterogeneous forms of information not easily reducible to a single quantitative score. Lack of institutions for sharing information between creditors, legal precedents, and strong resistance among borrowers to overly intrusive surveillance made the narrative report the best means to handle the diverse business credit market. By contrast, lenders in the consumer credit market established information sharing capabilities, which were enhanced after World War II when banks developed the credit card and card verification systems. Fair credit laws in the 1960s and 70s actually reinforced the move to quantitative scoring based on information shared among creditors, eventually institutionalizing the FICO score as the prime method of consumer credit evaluation.

Suggested Citation

  • Lipartito, Kenneth, 2011. "The narrative and the algorithm: Genres of credit reporting from the nineteenth century to today," MPRA Paper 28142, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:28142
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    File URL: https://mpra.ub.uni-muenchen.de/28142/1/MPRA_paper_28142.pdf
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    References listed on IDEAS

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    1. Hyman, Louis, 2008. "Debtor Nation: How Consumer Credit Built Postwar America," Enterprise & Society, Cambridge University Press, vol. 9(04), pages 614-618, December.
    2. Poon, Martha, 2009. "From new deal institutions to capital markets: Commercial consumer risk scores and the making of subprime mortgage finance," Accounting, Organizations and Society, Elsevier, vol. 34(5), pages 654-674, July.
    3. Rosenthal, Howard, 2001. "Navigating Failure: Bankruptcy and Commercial Society in Antebellum America. By Edward J. Balleisen. Chapel Hill: University of North Carolina Press, 2001. Pp. xv, 322. $55.00, cloth; $18.75, paper," The Journal of Economic History, Cambridge University Press, vol. 61(03), pages 861-862, September.
    4. Martha Poon, 2009. "From New Deal institutions to capital markets: commercial consumer risk scores and the making of subprime mortgage finance," Post-Print halshs-00359712, HAL.
    5. Martha Poon, 2009. "From New Deal institutions to capital markets: commercial consumer risk scores and the making of subprime mortgage finance," CSI Working Papers Series 014, Centre de Sociologie de l'Innovation (CSI), Mines ParisTech.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    credit score; credit reporting; credit; information economy; surveillance; FICO;

    JEL classification:

    • Z1 - Other Special Topics - - Cultural Economics
    • N82 - Economic History - - Micro-Business History - - - U.S.; Canada: 1913-
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-

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