Informational Synergies in Consumer Credit
48 Pages Posted: 12 Dec 2014 Last revised: 29 Feb 2020
Date Written: May 27, 2019
We investigate whether lenders can realize informational synergies by simultaneously obtaining private information from different accounts of the same borrower. Synergies exist if such information is complementary to each other. We focus on consumer credit, using 3.5 million observations from checking accounts and credit card accounts of the same individuals during 2007-2014. First, activity from both accounts is complementary for estimating consumer default beyond credit scores, borrower characteristics and relationship characteristics. Checking accounts display warning indications about consumer default earlier and more accurately than credit card accounts. Second, decision errors are lower when lenders consider cross-product information. The evidence suggests significant informational synergies that are important for the supply and allocation of credit.
Keywords: Household finance, credit risk, asymmetric information, account activity, consumer bankruptcy
JEL Classification: G20, G21, D12, D14
Suggested Citation: Suggested Citation