Credit rating

“ Moreover, so broadly has the custom of taking cash discounts spread that a failure to take advantage of them is generally regarded as an indication of weakness, and tends to undermine general confidence in the business man's credit standing. Hence the necessity for maintaining his credit rating, as well as competition, virtually forces the business man into making anticipatory cash payments and thus, more or less as a consequence, into the general practice of discounting his personal paper. ”

“ Partners’ Loans in Relation to Firm Credit.—Loans made by partners to the business may be viewed in two very different ways, depending upon the credit rating of the firm. If there is distrust as to the partners’ standing and financial condition, the fact that they themselves, who know the real condition better than any outsider, are willing to put additional capital into the business, is the best evidence that the firm is not so badly off. Consequently, loans made by partners under such conditions help to increase the firm’s credit. ”

“ These two methods of rating the value of collateral must approximately coincide, if the capitalization is to afford a stable basis for credit; and when an obvious discrepancy arises between the outcome given by the two ratings, then a rerating will be had in which the rating on the basis of earning-capacity must be accepted as definitive, since earnings are the ground fact about which all business transactions turn and to which all business enterprise converges. ”

“ Our once low credit ratings have now been upgraded by Moody’s, Standard and Poor’s, Fitch, and Japan Credit Ratings Agency—in recognition of our prudent use of funds and creative financial management. These improved credit ratings mean lower interest on our debts. Our innovative fiscal approach has saved taxpayers 23 billion pesos in the first four months of this year. This is enough to cover the 2.3 million conditional cash transfer beneficiaries for the entire year. ”

“ Starting this month, that includes the folks who come up with your credit score. If you haven’t checked out your credit score recently, you should. It can have a major impact on your life. It can determine whether or not you qualify for a loan or what kind of interest you have to pay. It can even affect your chances at renting an apartment or getting a job. But here’s the thing: the companies that put your credit score together can make mistakes. They may think you had a loan or a credit card that was never yours. ”

“ In general.—If a creditor increases the annual percentage rate applicable to a credit card account under an open end consumer credit plan, based on factors including the credit risk of the obligor, market conditions, or other factors, the creditor shall consider changes in such factors in subsequently determining whether to reduce the annual percentage rate for such obligor. ”

“ The usual rates are 1⁄8 per cent. commission on English and 1⁄4 per cent. upon foreign and colonial coupons, but, as a matter of fact, certain managers keep a list of those persons who refuse to pay these charges, while they who do not protest, no matter how large a sum they may keep to their credit upon current account, are made to pay the ordinary rates. It is only fair that a person whose average credit balance does not exceed £50 should pay a rate; but when a man keeps from £250 to £500 and above on the right side, the banker can quite well afford to forego his charge. ”

“ The disadvantage of the credit basis is the expense of bookkeeping which, of course, has to be added into the price of the goods sold. Our losses through unpaid bills have been negligible. Our customers are honest. But it has seemed unfair that the customer who pays cash should have to bear the cost of the credit accounts.
As our business has worked out more than fifty per cent. of our whole trade is on the cash basis. ”

“ It has been argued that the volume of credits granted by the banks depends upon business activity and upon the consequent demand for credit and not upon the power of the banks to grant credits, and, therefore, that low interest rates have little effect in causing an expansion of bank credits. ”

“ No bank shall grant credit to a person if as a result thereof:
a. the aggregate outstanding principal amount of all of the bank’s credits to that
person would exceed the equivalent of fifteen percent, or such lower percentage as
specified by regulations issued by the CBI, of the bank’s unimpaired capital and
reserves (large credit exposure) , without obtaining prior approval of the CBI ”

“ Consumer credit is an integral part of the free enterprise economy of the United States. The vast array of credit products has expanded opportunities for consumers. At the same time, this trend has increased consumers' need for simple, understandable information about their options. Informed consumers who know their choices, rights, and responsibilities are better able to choose and use credit wisely. The prudent use of credit increases economic stability and enhances market competition. ”

“ Merchant: Now, gentlemen, why all this frightful agony, this terrific straining, this ever-recurring tragedy and universal ruin, simply because we persist in being utterly ignorant of the simplest economic truths which our own actions on every such occasion have demonstrated—that there is absolutely no difference between a bank book credit and a bank note credit, except that the people want something that passes current in greatly increased quantities, when loaning stops or credit is checked. ”

“ As a result of interchangeability of book and note credits, a bank could always protect its coin reserve, for if the customer was just as well satisfied to take the bank's notes, instead of coin, or its reserves, it must be apparent to all of you that the cost to the bank would only be from one-sixth to one-fourth as great, and that the bank would have several times as much credit to loan, and at the same time be in a much stronger position. ”

“ Our imports in the way of commodities such as hides, coffee, [Pg 328] rubber, wool, etc., etc., run into hundreds of millions of dollars annually, and these are financed generally through the medium of commercial credits established by the purchaser in favor of the vendor of the merchandise. Commercial credits, so called, are in effect a bank guarantee to the seller that his drafts covering certain merchandise, when drawn in accordance with the conditions prescribed in the credit, will meet with due honor on presentation to the accepting bank named in the credit instrument. ”

“ I say approximately because M ́ (defined by Professor Fisher as "bank deposits subject to check") , if it be made to express an accurate measure of circulating credit, should include not only open bank accounts, but certain other values which constitute current means of payment, such as bankers' bills, trade bills, cashiers' checks, and certified checks....
The relation which Professor Taussig has pointed out between M ́ and T (the value of negotiable credit and the contemporary volume of trade) is not only possible, but, in any community of modernized commerce, is actual. ”

“ The bank or banks which hold the reserve may last a little longer than the others; but if apprehension pass a certain bound, they must perish too. The use of credit is, that it enables debtors to use a certain part of the money their creditors have lent them. If all those creditors demand all that money at once, they cannot have it, for that which their debtors have used, is for the time employed, and not to be obtained. With the advantages of credit we must take the disadvantages, too ”

“ There has been no dissent from the view that an agreement to apply a designated credit or account to the payment of a check or draft drawn upon it creates security in the credit enforcible in equity as against general creditors. ”

“ And fixing your credit score isn’t the only thing they can help with.
If you’re opening a bank account, trying to get a student loan, or applying for a credit card and something doesn’t seem right, you can let them know and they’ll check it out. If you’re looking to buy a home, and you want to know if you’re getting a fair deal on your mortgage, you can give them a call and they’ll get you an answer. Their only mission is to fight for you. ”

“ What are the economic differences between long and short time loans? How shall we draw the distinction between the "money-rates" and the long time interest rate on "capital?" Why can some things serve as collateral in the money market when others cannot? What sorts of credit are appropriate to commerce, to manufacturing, to agriculture? Is credit capital? Is an increase in credit an increase in values? The last two of these questions imply that we have a definition of credit. ”

“ Not much competition for Federal Reserve bankers there, is there? Peg that proposition and look at the next one.
Here it is. The loans of a bank are the life of a bank. From the interest upon them comes practically the sole earnings of a bank and upon their repayment depends the solvency of a bank. The credit department of a bank is its solar plexus. Loans must be successfully made to men engaged in every variety of industry, some secured, some unsecured and in amounts varying from a few hundreds of dollars to hundreds of thousands of dollars. ”

“ Having disposed of the paying average credit balances we can now discuss those accounts that [42] have a large turn-over. A trader, for instance, who draws a considerable number of cheques during the course of a half-year, and whose balance is small, cannot expect his banker to work his account free of charge; but it is difficult to draw up a table showing what he ought to pay, for the simple reason that some bank-managers debit him with a rate which they think he will stand. A 1/16 per cent. commission, that is to say, 1s. 3d. upon each £100 he draws out by cheque, seems a very full rate ”

“ With a given amount of money a certain proportion of it can be used for bank reserves on which to build credit transactions. For a time the volume of business will increase more rapidly than the money supplies, so that the proportion of credit business to the whole will increase, the improvement of the credit machinery in the meantime facilitating the movement. But the perfection of the facilities for utilizing to the utmost a given reserve, or a slowly increasing one, will come to a stop after a time, and it will be necessary to increase the money supply for any further expansion of credit. ”

“ The customer naturally does not see why he should pay a rate upon £4,000 which he has not wanted, and which, in reality, the banker has not lent, though he has created credit in his own books to that extent by two simple entries on the debit and credit side of his ledgers. Assuming that no commission was charged on the loan, £60 a half-year seems a large sum to pay him for working an account, especially as most of his rivals will bid against him for a well-secured loan. ”

“ Though a man keep a balance of £10,000 to his credit, he will not receive one penny in the shape of interest unless he ask for it, and, even after having arranged a rate, it is advisable to check the banker’s figures and ascertain that you are getting it, as, sometimes, they are apt to err in his favour, through small debits that have been deducted from the interest, and which, consequently, do not appear in your pass-book. ”

“ Seasoned bonds have been bought in great volume by our commercial banks, but few stocks. Even the underwriters and investment bankers have been primarily intermediaries, expecting to pass on to private buyers the securities they hold temporarily. My point here is, merely, that there is nothing in the distinction between static and dynamic credit, when by that is meant the distinction between credit for new enterprises and credit for old enterprises, to mark off a peculiar or essential province for bank-credit. ”

“ The cover consists principally of current securities with a margin against fluctuations according to the nature of the security, and which is higher for shares than for securities bearing a fixed rate of interest. Uncovered credit is only granted in exceptional cases to others than business men—as a rule only to first-class mercantile firms of repute, whose affairs are in strict order.
Bankers and other firms with large cash transactions keep a so-called "cheque" account at their bank in addition to the chief account, in which no debit balances may occur ”

“ The credit given to any one by those with whom he deals, does not depend on the quantity of bank notes or coin in circulation at the time, but on their opinion of his solvency: if any consideration of a more general character enters into their calculation, it is only in a time of pressure on the loan market, when they are not certain of being themselves able to obtain the credit on which they have been accustomed to rely ”

“ It is also a a error to suppose that checks and drafts to any very great extent take the place of credit money. It facilitates business for a man to be able to carry his check book with him instead of the danger and inconvenience of carrying a large roll of bills; but the equivalent of each check he draws must be to his credit in bank to meet the check. If a man gives a check for $100, and that check is transferred to six different parties and pays in that way six different debts in the course of the day, it does no more than a $100 bill would have done. ”

“ Similarly, the basis for the valuation of each of the asset items must be investigated and determined correct before the balance sheet may be considered to represent the true financial condition of the business. It is the experience of every business that it cannot collect all of the credits extended to customers. Regardless of how carefully credit is granted, it will be found that some customers do not pay their debts. ”