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Bad credit, no problem?: credit and labor market consequences of bad credit reports

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Authors and Corporations: Dobbie, Will (Author), Goldsmith-Pinkham, Paul (Author), Mahoney, Neale (Author), Song, Jae (Author)
Other Authors: Goldsmith-Pinkham, Paul [Author] • Mahoney, Neale [Author] • Song, Jae [Author]
Edition: Revised May 2017
Type of Resource: E-Book
Language: English
published:
New York, NY Federal Reserve Bank of New York [2017]
Series: Federal Reserve Bank of New York: Staff reports ; no. 795 (October 2016)
Subjects:
USA
USA
Source: Verbunddaten SWB
Lizenzfreie Online-Ressourcen
Description
Summary: Credit reports are used in nearly all consumer lending decisions and, increasingly, in hiring decisions in the labor market, but the impact of a bad credit report is largely unknown. We study the effects of credit reports on financial and labor market outcomes using a difference-in-differences research design that compares changes in outcomes over time for Chapter 13 filers, whose personal bankruptcy flags are removed from credit reports after seven years, to changes for Chapter 7 filers, whose personal bankruptcy flags are removed from credit reports after ten years. Using credit bureau data, we show that the removal of a Chapter 13 bankruptcy flag leads to a large increase in credit limits and economically significant increases in credit card and mortgage borrowing. Using administrative tax records linked to personal bankruptcy records, we estimate a precise zero effect of flag removal on employment and earnings outcomes. We rationalize these contrasting results by showing that, conditional on basic observables, "hidden" bankruptcy flags are strongly correlated with adverse credit market outcomes but have no predictive power for labor market outcomes.
Physical Description: 1 Online-Ressource (circa 64 Seiten); Illustrationen