With that as context, I want to focus my comments today on two points related to the major economic consequences of the relationship between credit scores and uncertainty.
The first point I want to make is that credit scores and reports have substantially reduced uncertainty that numerous types of businesses have about consumers, which has resulted in economic growth and prosperity. That is particularly clear in credit markets. Prior to these products, borrowers and lenders in our economy were essentially standing around in a dark room, only able to interact with and be knowledgeable about people that they were located near to.
Credit reports and scores were part of a number of innovations that turned the light on in that room, so that suddenly lenders could see many more borrowers, which substantially reduced the uncertainty they had about the likelihood they would be able to make future payments on loans.
The chief economic impact of that reduced uncertainty has been to support economic growth and the historic democratization of credit that occurred in the 20th century, particularly in the last couple of decades. That happened because once lenders could see more borrowers they saw millions of Americans that looked liked profitable customers for credit and loan products. That led to more businesses and consumers having access to more money, which meant more spending, more investing, more jobs…more economic growth.
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