In the pubs of 1950s Britain, going for a drink and ordering a pint you did not pay for there and then was not unusual. To 'put it on my tab' was a genuine financial transaction, built on the fact that the landlord knew his customers well. He had watched them drink in his pub for three years, knew where they worked, knew their wives' names, and knew that they always settled up on a Friday. None of this could be replicated by a credit reference agency.

That was your credit score. It just lived in a human brain rather than a database.

The Pub as a Financial Institution

It sounds nostalgic, maybe a little romantic, but it was genuinely functional. In Britain, pubs, corner shops and market traders operated on what economists now call "relational credit", ie informal lending based on personal knowledge and community reputation. The butcher would let you take your joint on account. The grocer would keep a little notebook with names and running totals. The landlord would know which customers were reliable and which ones conveniently forgot their wallet every third visit.

The ability to access this informal credit depended entirely on being known. It meant living somewhere long enough, being visible enough, having enough of a reputation that people would vouch for you – or at least that the person behind the counter had watched you long enough to feel comfortable. Being trustworthy was not abstract; it was legible because it was local.

The Moment Millions of People Became Invisible

As lending scaled up in the 1960s and 70s, banks wanted to lend mortgages and personal loans to customers across the country, not just to customers their branch managers happened to recognise. A landlord's intuition does not stretch to Leeds from a London bank. So the industry needed a different system – one that could assess strangers.

When the credit score was formalised by agencies such as Experian and Equifax from the 1980s onwards, it asked not "does someone who knows this person trust them?" but "what does this person's trail of financial transactions look like?" Regular payments, electoral roll registration, consistent addresses – these became the data points that replaced a landlord's memory.

A significant chunk of the population had always operated in cash, in community trust, in local relationships. They are not financially irresponsible. They were simply invisible to the new system: no credit card meant no trail, no trail meant no score, and no score meant no mortgage, no phone contract, sometimes even no bank account. People who had spent decades being impeccably reliable, in ways that were never recorded, suddenly found themselves classified as high risk by an algorithm that simply cannot see them.

Building Credit Is Basically Becoming Legible Again

Most people think about building credit in the same way they do accumulating points on a loyalty scheme. What is building credit? Generating data that tells lenders, in a language they can read, that you exist and that you're reliable.

A credit card which you use for small purchases and which you pay off every month is a modern tab. You're borrowing a little, regularly, and the repayment is being recorded. A direct debit which never bounces, your phone contract kept up to date, and you registering to vote – because being on the electoral roll confirms you are who you say you are, at the address you say you live at.

None of these things make you more creditworthy in any meaningful moral sense. They make you legible. They reconstruct, in data form, exactly what the landlord already knew: that you show up, you pay up, and you can be trusted to do it again next time.

What the Old System Got Right

The landlord's method had real flaws. For one, it was local, so it didn’t travel. It was personal, so it could be prejudiced. Women, immigrants and anyone who didn’t fit the social expectations of their community would often find that simply being known wasn’t enough, and in many cases it counted against them.

But it grasped one thing that the algorithmic version took years to catch up with: that reliability is a habit, not a number, demonstrated in small, consistent actions over time. That’s what a credit score tries to measure in a very clunky and impersonal way. The practical advice has barely changed in seventy years: show up, pay what you owe, do it regularly, and make sure someone can see that you are.

FAQ

What is relational credit?

Relational credit refers to informal lending provided on the basis of personal knowledge of the borrower and their reputation within their local community rather than data. In 1950s Britain, for example, pubs, corner shops and market traders would allow regular customers to purchase goods on account and run a ‘tab’ of unpaid bills because they knew them well. Credit was provided on the basis of local knowledge of the borrower’s good reputation.

Why did the credit score replace the local landlord’s judgement?

Banks sought to make mortgage and personal loans available to customers all over the country, not just people a branch manager recognised. The informal approach of a landlord allowing his regular customers to run a tab and buy on account as and when they came into the pub, shop or market stall because he knew them could not extend from London to Leeds, so lenders needed a system that could assess strangers. Agencies such as Experian and Equifax formalised credit scores from the 1980s onwards.

What is building credit?

Building credit basically means that lenders can see that you exist and that you are reliable. It doesn’t have to do with how moral you are; it just has to do with being transparent enough for the system to read you. Using a credit card for small amounts of money and then paying it off at the end of the month, making sure direct debits and phone contracts are up to date, registering to vote – all of these things will help to build your credit history.

Why can reliable people have no credit score?

There are many people who have lived their lives on cash and community trust, leaving no financial footprint whatsoever. Without a credit card they have no credit history, which means no credit score. No credit score can mean no mortgage, no phone contracts and even no current account. The algorithm simply cannot pick up on years of dependable behaviour and therefore views them as high risk.