Equifax is one of the three largest credit bureaus in the United States, providing information about consumers to clients in several businesses, including insurance companies, credit card issuing firms, banks, and other lenders. With computerized files containing information on members of the adult population in all fifty states, Equifax makes a profit by collecting, compiling, and providing information to others.
Equifax was founded in 1898 by two brothers, Cator and Guy Woolford. Cator Woolford got his start in the credit bureau business as a grocer in Chattanooga, Tennessee. There he supervised the compilation of a list of customers, with indications of their credit-worthiness, for the local Retail Grocer’s Association. To cover the costs of this effort, Woolford sold copies of the book to other merchants. Pleased with the success of his first listing, Woolford set out to make credit reporting his career.
With his brother Guy, a lawyer six years his junior, Cator settled on Atlanta as the site of his new venture. After several visits to the city, the Woolfords rented an office consisting of a single room on the fifth floor of the Gould Building, at 10 Decatur Street, and had the words “Retail Credit Company “ printed on the door in large black letters. On March 22, 1899, the company opened for business.
Relying on his experience in Tennessee, Cator began by seeking out an alliance with the city’s grocers. Using the ledger books of Atlanta’s food retailers, the Woolford’s copied out credit information on their customers on individual slips on paper, then arranged them into a book. After a month the task had grown so large that two additional men were hired to assist the Woolfords, and one week later a woman was employed as well. In June the pages of the book were run out on a mimeograph machine and bound between hard covers with the title “Merchant’s Guide.”
Merchants paid $25 a year to use the book and subsequent credit reports; grocers paid less. Although the company sold seven subscriptions rapidly after one of Atlanta’s largest department stores bought the first, by the end of Retail Credit’s first year, only 37 merchants and 47 grocers had signed on board. The company posted a loss of $2,242.
In the following year, however, the number of customers increased and the company also branched out to other small, fastgrowing commercial centers in Georgia. Credit books for Athens, Rome, Columbus, Macon, and Augusta were developed and marketed and a branch office was opened in Augusta. By the end of the company’s second year, the staff had expanded to eight and the volume of sales was growing steadily.
In June of 1901, Retail Credit branched out into another industry, as it began providing so-called “moral hazard” information on potential policy holders to the Equitable Life Assurance Society. Insurance companies paid much more highly for the information they needed; Retail Credit quickly expanded operations into this lucrative area. In the fall of 1901, the company dispatched a salesman to the Northeast to drum up business in the home offices of the nation’s largest insurance companies. Armed with a form showing the information that would be provided about each potential customer, the salesman pulled in a large number of new clients.
As a result of its growing insurance business, Guy Woolford opened a second company office in Dallas, Texas, in March of 1902. Woolford relied on a large number of correspondents, primarily lawyers and merchants in small towns across the Southeast, to fill out reports on people trying to get insurance. The following year the company also opened a branch office in Cincinnati.
In April of 1903, Retail Credit closed its Augusta office, after clearly noting signs that the branch would not become profitable. The same year, the company split operations between its two main clients, handling retail and insurance reports separately. Different inspectors carried out the two types of investigations. The company’s retail credit reporting activities were restricted to the Atlanta area, while insurance activities were delegated a wider scope.
In 1904 a fourth office was opened in Kansas City, Missouri. Soon offices in Chicago and San Francisco came on line. Two years later the San Francisco office was entirely destroyed in by earthquake and fire. Despite this setback, geographical expansion continued and New York premises were opened in 1907. Attempts to run facilities in Baltimore, Greensborough, and Philadelphia during this time failed, and the offices were closed.
Retail Credit set a pattern of aggressive development in the life insurance-related business that would later be applied when entering other fields. For instance, in 1908 the company began issuing reports for automobile liability insurers. With only seven branch offices in operation, Retail Credit proclaimed that it provided a “National Inspection Service,” providing reliable reports of uniform quality for insurance purposes.
By 1913 Retail Credit had developed a special form for automobile insurance, to be completed by the investigator. The company started providing information to accident insurers and soliciting work related to fire insurance. With the company’s sales running at $350,000, the Woolfords decided to incorporate. The enterprise was newly christened the Retail Credit Company, Inc., on December 29, 1913.
By 1915 Retail Credit’s earliest work compiling lists of good and bad credit risks in the Atlanta area had dwindled to almost nothing. While this type of operation was inherently local, Retail Credit had become interested in activities that could be pursued on a broader scale. Towards this end, the company opened five new insurance-related offices in that year.
By the end of the company’s second decade of existence, Retail Credit was thoroughly established as a significant partner in the life insurance business. The credit bureau had opened 34 branch offices in the United States and three in Canada, as well. In 1920, however, Retail Credit’s insurance business suffered a serious blow when a consortium of insurance companies formed the American Service Bureau to provide members with investigative reports of the sort that Retail Credit supplied. Similarly an agency that had previously limited its activities to claims inspection also joined the fray. The increased competition resulted in a serious slump in Retail Credit’s life insurance and credit reporting activities in 1921.
Retail Credit attempted to make up the slack by increasing automobile insurance reporting; by the following year, more than one fifth of the agency’s business was contributed by this division. The company also developed its first form containing questions relating to fire insurance. In the ensuing years, the volume of requests for this new service increased dramatically.
In 1923 Retail Credit spun off local consumer credit rating operations and formed a new corporation, Credit Service Exchange. These activities had long taken place at a different location under separate management; three years later, Retail Credit further severed its connection when the Exchange was sold to businessman L. S. Gilbert. By the end of the decade, however, Retail Credit had opted to re-enter the consumer credit reporting business. In the early 1930s Retail Credit, having 81 branch offices at its disposal, began studying cost-effective means of getting back into the commercial credit report business. Gathering information by telephone, as well as simplified forms for recording information, were two of the steps taken towards this end. Also proving helpful was the advent of credit bureau associations which had begun springing up as exchange of information between fellow creditors became more common. In March of 1930, Retail Credit established the Georgia Credit Exchange to provide services in cities across the state. In 1934 Retail Credit purchased a Brooklyn credit agency, Retailers Commercial Agency, Inc.
Retail Credit moved to professionalize operations in the 1930s, relying less and less on part time correspondents for information and more often utilizing full-time, companytrained inspectors. By 1937 nearly three quarters of all the company’s inspection forms were being filled out by full-time investigators, operating out of 96 Retail Credit offices in cities across North America.
The United States” entry into World War II had a serious impact on Retail Credit’s business. In 1941, when the war began for the United States, the company was providing 7.5 million reports a year; however, many of its inspectors were drafted into the military and other employees left the enterprise to engage in war-related endeavors. In the first full year of U.S. military involvement, the company lost 1,200 workers. Pushed to the limit, Retail Credit finally allowed women to work as inspectors, in most cases permitting wives to take over their absent husbands” jobs. By 1944 the volume of reports produced had sunk to 6 million.
With the robust recovery of the American economy in the postwar years, however, Retail Credit’s business revived and grew. The company continued expansion by opening new branch offices throughout the decades following the war. In 1950, 140 locations were providing services. The number grew to 258 over the next ten years.
By the mid-1960s, nearly 300 branch offices had been opened along with almost 1400 sub-offices, employing roughly 7,400 inspectors. The company sold stock to the public for the first time in 1965. During this time, Retail Credit also took its first steps toward automation, converting files written on 3x5 index cards to electronic data systems. Eventually the company’s ability to retrieve information by computer from vast data banks would prove one of Retail Credit’s greatest assets.
In the early 1970s, Retail Credit purchased several competitors, buying credit bureaus in Oregon, Idaho, and California, and Washington D.C.’s Credit Bureau, Inc. These purchases were subsequently challenged by the Federal Trade Commission (FTC), which claimed that they reduced competition. After a decade-long court battle, Retail Credit was allowed to retain the purchases.
Retail Credit’s activities in the consumer credit business were regulated for the first time in 1971, when Congress passed the Fair Credit Reporting Act, effective in April. Under this law, consumers were given the right to gain access to their credit files and correct errors in them. The law also restricted the kinds of information credit bureaus could sell.
Three years later, Retail Credit ran afoul of the new federal regulations and was charged with violating the Fair Credit Reporting Act and the Federal Trade Commission Act. Among other directives given, the U.S. government ordered Retail Credit to stop rating employees by how much negative information they collected on consumers and to stop having investigators misrepresent themselves when conducting inquiries.
Retail Credit changed its name in 1979 to Equifax, derived from “equitable factual information.” The change symbolized the company’s growing capabilities and prepared the way for further diversification of its activities, from operations centered in the insurance industry to wider marketing functions. In 1979 the company took a big step in that direction, acquiring Elrick & Lavidge, a Chicago firm that performed marketing surveys, and merging it into the company’s Marketing Information Services subsidiary.
Also in the late 1970s, Equifax began strengthening consumer credit reporting operations by buying up small, local credit reporting agencies and by affiliating with others. In doing so, the company built up its computerized files enormously and paved the way for greater diversification. Likewise, Equifax gained the capability to provide additional types of information to clients.
Consolidation in the credit bureau industry continued throughout the 1980s, as Equifax and its two largest competitors, TRW, Inc. and the Trans Union Corporation, divided up the nation’s smaller credit bureaus amongst themselves. In a ten-year period, 104 smaller credit bureaus had been added to the Equifax network alone. By 1986 the company’s files covered 150 million people in 28 states. In the following year, the company’s capacity grew 40 percent, to cover all 50 states.
During this time, Equifax also continued to spend heavily on technological developments for the purpose of keeping data-processing equipment up-to-date and offering new products to customers with the equipment. Equifax moved into marketing databases, which allowed patrons to target their most likely customers. In April of 1988, the company established a marketing services division, whose first project was to develop a direct mail program to sell home mortgages for a midwestern insurance company. The company planned to handle all phases of the operation, including selection of potential customers, production of mailing brochures, handling of telephone inquiries, verification of credit applications, and property appraisal. The marketing division had sales of $90 million in the first nine months in operation. Between 1983 and 1988, the company’s overall revenues increased by nearly 60 percent, to $743 million, and earnings more than doubled.
In May of 1989, Equifax formed a strategic alliance with the fifth-largest credit bureau, CSC Credit Services, a division of the Computer Sciences Corporation; the yield was 65 additional bureaus bringing Equifax’s total number of bureaus to more than 300. The company’s operations had already been divided into four divisions: insurance information services, its traditional strength; credit services; marketing services, the newest division; and Canadian operations, which were consolidated into one company, Equifax Canada Inc., in June of 1989.
Equifax also divested itself of two unprofitable units in 1989, Equifax Insurance Systems and Enercon, Inc. As the 1990s arrived, the company strove to enter the European market. Equifax formed Wescot Decisison Systems as a joint venture with marketer Next PLC in the United Kingdom. Late in 1991, the company bought out its British partner to form Equifax Europe.
In addition to formation of a technology division, brought about by the consolidation of the company’s activities in that field, Equifax also acquired Telecredit, Inc., a Los Angeles credit bureau that provided check and credit card authorization services, for $457 million. The company’s purchase of Telecredit was complicated by a sizable drop in the value of Equifax stock during 1990, as investors grew concerned about the stability of the company’s profits in an economic downturn.
Another concern was growing consumer dissatisfaction. In 1989 Equifax had commissioned a poll that showed that 71 percent of all Americans thought they had lost control over information concerning their lives and 79 percent considered privacy a basic right. Equifax was forced to confront growing consumer hostility in the early 1990s, as watchdog groups contended that credit bureaus” files were often inaccurate and were used in inappropriate ways. As an Equifax executive explained in Business Week, “People see the use of this information as a privacy problem if it goes beyond credit purposes.” To make amends, Equifax announced in August of 1991, it would cease using credit information to compile lists for the purposes of direct marketing. The company would also no longer keep tabs on customers” buying histories for the purpose of placing shoppers in a range of categories from “luxury buyers” to “coupon clippers.” Four months later, the company spent $9 million to open an elaborate consumer services center which provided information to callers about their credit file in eight languages.
Leaving the direct marketing business enhanced Equifax’s public image without too much sacrifice; the relinquished activities provided only $12 million, or one percent of Equifax’s revenues. In addition, the company modified the processes for correcting mistakes in its files, making it easier for consumers to set the record straight. By taking these steps to mollify the public, Equifax hoped to ward off federal legislation that would mandate costly measures to increase fairness. The company hoped to avoid the expensive class action suits over its activities that competitors had suffered.
Equifax’s image-polishing moves came just as the company’s net income had declined by almost 40 percent in the first half of 1991; the general recession had held down demand for credit and credit reports. Despite Equifax’s flat earnings, however, the company moved past the main competitor, TRW, to seize the lead in market share among credit bureaus in the beginning of 1992.
Roberts, J. S., The Spirit of Retail Credit Company, Atlanta, Retail Credit Company, 1965; Jakubovics, Jerry, “Jeff White Helps Equifax Fly High,” Management Review, 1988; Maloney, Peter, “Credit Bureaus: An Oligopoly Raking in the Dollars,” United States Banker, October, 1989; Schwartz, Evan I., “Equifax” Exit May Not Tame the Consumer Backlash,” Business Week, August 26, 1991; Konrad, Walecia, “Credit Reports—With a Smile,” Business Week, October 21, 1991; Kretchmar, Laurie, “How to Shine in a Sullied Industry,” Fortune, February 24, 1992.