These are some of the questions, the answers to which will assist in determining the credit risk.
The country retailer needs other information about his customers. As a rule, he can answer all of the questions asked by the city retailer in respect to his own customers. He is more intimately acquainted with his customers; he has a better opportunity to learn their characteristics and habits, than the city retailer. The country retailer has another advantage, in that a closer bond of friendship exists between him and his neighbor merchants. The interests of city merchants are no less common, but distances separating them make an interchange of views more difficult.
About his country customers—the farmers—the retailer requires still different information. Besides full information about the real estate owned, and mortgages given, he needs to know something about the man himself.
Does he market his crops early, or is he a speculator—always holding for possible higher prices?
Is the farm well kept up?
Are the implements properly housed, or left outside at the mercy of the elements?
Does he keep his live stock in good condition, and how much does he feed for market?
Is he thrifty or shiftless?
Only by personal contact can these things be learned. The country merchant who keeps in closest touch with his farmer customers—sympathizing with them in their misfortunes and rejoicing in their prosperity—is usually the most successful. As one country merchant puts it, he must act as a general advisor, and help them bear their very aches and pains.
SOURCES OF INFORMATION
The usual sources of credit information are the mercantile agencies, reports from local correspondents, reports from traveling salesmen, and merchants' associations or credit reporting agencies.
Mercantile Agencies. Of these sources, perhaps the best known and most widely used by manufacturers and jobbers, is the mercantile agency. The mercantile agency is the outgrowth of a necessity. About the year 1840, a few New York merchants formed an association for the interchange of credit information. Later, this became a business conducted by individuals who charged a small fee for written reports.
The business has grown to such proportions that a single agency requires about 200 offices, located in the principal cities throughout the world. In the territory of each office, which is presided over by a manager, correspondents are employed, and at certain seasons country reporters traverse every district, gathering data to be forwarded to the branch offices. Every court house in the United States has its paid correspondent, who promptly reports any action—as the filing of suits, recording of mortgages, or entering of judgments—that might affect the credit risk of any business man in the country.
Some idea of the magnitude of the business, and the task of gathering statistics, can be gained when it is considered that the books of a single agency contain the names and ratings of about 1,500,000 persons. About each of these individuals, the latest data collected by the reporters is on file in the various branch offices.