Credit history – What is it, definition and concept

The history of credit shows us the evolution of this banking activity over time, from its origin as a promise of future payment to its complexity in the financial system.

We must take into account that the credit is born from the surplus. Thus, when we have enough goods to cover the needs of the population, we can save. In this way, these savings can be lent to others through agents specialized in this activity.

The history of credit and its etymology

The word “credit” has its origin in Latin. Specifically in creditum, which can be translated as “trusted thing”. Therefore, this word means to entrust something to another person, in this case money. Because it consists of that, entrusting money to someone who will return it later.

The Romans were the ones who developed this activity, charging interest for leaving the money to others. Of course, at that time the lender carried out a very risky activity. That is why these interests could be very high.

The history of credit goes hand in hand with that of finance and the creation of the banking system. In this way, the banks were the ones that developed various increasingly complex forms of credit. In addition, credit began to be based on other parameters and not only on savings.

The history of credit in commercial and industrial capitalism

Between the 16th and 17th centuries and the first half of the 18th century, the so-called “commercial or mercantile capitalism” took place. This was based, above all, on trade with the colonies of different countries. At this time, the credit was given above all, in operations between private investors.

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In the second half of the 18th, 19th and 20th centuries, “industrial capitalism” develops. This was a step after the mercantile one, which allowed the accumulation of capital thanks to the surpluses of trade. Bank credit develops in this period, especially in the 20th century.

consumer credit. The great Depression

The Great Depression marked a before and after in the history of humanity and also of credit. Two events were responsible for its development. Monopoly capitalism based on large productions and the possibility of paying for goods with small installments.

On the other hand, various agents capable of offering loans appeared, not just banks. Thus, specialized financial companies were created that offered tailor-made loans to others so that they could finance their clients.

Credit history. The 21st century

The 21st century can be considered as the age of technology and this has affected credit. Online banking, electronic payments and other activities carried out on the Internet have contributed to an even greater complexity in credit activity.

In short, the history of credit is full of important events that changed the way of understanding the economy and finances. In addition, this deferred payment system allowed economic growth unparalleled in past times.

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