Answers To The Question: How Did Credit Start?
CREDIT – In this article, we will learn about the history of credit, how it started, and its importance.
You might not know this but the history of consumer credit dates back to at least 5,000 years ago. There is significant evidence that cultures worldwide were borrowing for different reasons.
In the writings taken from Hammurabi’s code all the way to documented exchanges by the Romans, credit was used. It was recorded that it was used for getting things such as silver.
It was also used to buy property or for agricultural loans to farmers. It was around 3,500 BC in Sumer where it is believed that consumer loans for agricultural purposes were first used.
According to an article from Business Insider, the Code of Hammurabi was the first to formalize laws around credit. It established the maximum interest rates that could be used legally.
During that time 33.3% per year on loans of grain, and 20% per year on loans of silver were the standard. To be valid, loans had to be witnessed by a public official and recorded as a contract.
Skip ahead to the 1500s, Europeans started to explore the world. Explorers and merchants started trade missions to distant lands.
From there the need for capital and credit rose to exponential levels. Afterward, by 1545, England was the first country to establish a legal rate of interest.
This was during the reign of King Henry VIII. At the time, the rate of interest was 10%.
A couple of centuries later, England started the birth of modern consumer credit. They were the ones who started credit reporting.
The earliest account of this is that of a group of English tailors that came together to swap information on customers who couldn’t settle their debts.
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