Credit Online

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Credit Online

Credit online can have two meanings. It refers to services that provide online credit verification on companies that conduct business over the Internet. It can also refer to online credit card applications and obtaining credit reports for individuals.

With the enormous growth of the Internet and electronic commerce, online credit, or trust, has become an increasingly important issue. Although the Internet offers tremendous new opportunities in business and other areas, there are also great uncertainties and risks in the online world. Does an online store have a good credit history? Can you trust the store to send you the product you are ordering and paying for in advance? Those questions center on the notion of credit and what that means.

Credit can be defined as a belief and a confidence in the reliability of the other party. We can check the credit of an individual or a company by assessing the party's past behavior. We can also try to infer a party's credit by examining its ability to meet its obligations. For example, we can look at a company's financial information—such as assets, earnings, and stock price—to have a better understanding of the company's trustworthiness.

In the world of the Internet, consumers often deal with a distant party that can be identified only by an Internet address. An online business must have a good reputation in order for consumers to have confidence in doing business with the company. Credit between long-term business partners can develop through past business experiences. Among strangers, however, trust is much more difficult to build because strangers lack known past histories. Given these factors, the temptation for someone to cheat over the Internet could outweigh the incentive to cooperate. Two types of credit systems can help consumers overcome these concerns.

Building Online Trust

An Internet reputation system allows a customer to verify a company's credit even though the customer has never interacted with the firm before. At eBay, the largest person-to-person online auction site, although the company offers limited insurance and buyers and sellers have to accept significant risks, the overall rate of fraud remains astonishingly low. eBay attributes this to its reputation system. After a transaction is complete, buyers have the opportunity to rate the seller and leave comments. The reputation system at eBay serves as a credit system for its customers. Before purchasing an item, a new buyer can check the seller's credit by examining its ratings from past customers. Such reputation systems are not limited to eBay and other auction sites, however. For example, Bizrate.com rates online retailers by asking consumers to complete a survey after each purchase.

Online credit can also be established through third-party endorsement and assurance. Usually, the third party has a good reputation and is highly trusted in society. For example, the Better Business Bureau (BBB) offers two programs to endorse companies that have met the BBB's standard. The reliability program confirms that a company is a member of a local Better Business Bureau, that it has been reviewed to meet truth-in-advertisement guidelines, and that it follows good customer service practices. The privacy program can confirm that a company stands behind its online privacy policy and has met the program requirements regarding the handling of personal information that is provided through its web site. The BBB gives qualifying companies a seal of endorsement. The seal can then be displayed on the qualifying company's web site, encouraging users to check BBB information on the company.

Companies such as eBay and the BBB that provide online credit services utilize the Internet and World Wide Web to collect information on online merchants and make the credit information available on the Internet. For example, customers at eBay can easily submit comments on a particular seller online. eBay then collects the comments electronically, saves them in a database, and makes the compiled information available to all potential buyers. In order to get a BBB seal of endorsement, companies can go to the BBB web site and apply electronically. Consumers can also use the Internet to file complaints with the BBB if they are unsatisfied with the service of a company.

For these online credit systems, the Internet is the interface through which consumers can access credit information and submit comments or complaints. The information is written in Hypertext Markup Language (HTML) so that web browsers can display the multimedia information consistently. Companies that provide credit information use web servers, database management systems, and web software programs written in Java, C, VBScript, or other programming languages to build such applications.

Credit Cards and Credit Reports Online

Consumers can also apply for credit cards online and obtain their credit reports over the Internet. Banks and credit companies such as Citibank and American Express allow customers to apply for credit cards online and receive an instant response. This is made possible because individual credit information is stored electronically in large databases, and financial companies can access the information and make quick decisions. Companies such as QSpace.com provide credit reports to individuals over the Internet. In the United States, companies such as Equifax maintain consumer and commercial credit information on file. However, errors sometimes occur in these credit profiles, which may cause problems for the affected individuals. By checking their credit profiles, consumers can manage their own credit by correcting credit reporting errors and finding out how to improve their credit rating, if necessary.

Security is a major concern for both online credit card application and access to credit profiles because sensitive personal information is involved. The transmission of private information is protected using Secure Socket Layer (SSL), an encryption technology that allows the web browser to encrypt or scramble data automatically before they are sent through the Internet.

see also E-commerce; Privacy; Security.

Ming Fan