Born to Be (sub)Prime: An Exploratory Analysis

AEA Papers and Proceedings

13 Pages Posted: 11 Mar 2023

See all articles by Helena Bach

Helena Bach

University of Geneva

Pietro Campa

University of Geneva

Giacomo De Giorgi

University College London; NBER; Federal Reserve Banks - Federal Reserve Bank of New York

Jaromir Nosal

Boston College

Davide Pietrobon

Lund University School of Economics and Management

Date Written: March 7, 2023

Abstract

We study how inheriting parents’ credit histories affects credit scores, access to credit, and subsequent experiences of young indi- viduals entering the credit market. First, having an inherited credit history significantly positively affects credit scores at entry. Second, initial credit scores are very persistent. Third, inherited credit histo- ries only affect outcomes through the initial credit score distribution. Finally, initial credit scores have significant persistent effects on credit use and access, such as having a mortgage or credit card penetration and utilization rate. Our results point to the importance of initial con- ditions in credit markets and are consistent with mechanisms based on multiplicity of equilibria and self-fulfilling liquidity traps in which lack of access to credit due to low credit scores re-affirms the low credit score ranking of an individual.

Suggested Citation

Bach, Helena and Campa, Pietro and De Giorgi, Giacomo and Nosal, Jaromir and Pietrobon, Davide, Born to Be (sub)Prime: An Exploratory Analysis (March 7, 2023). AEA Papers and Proceedings, Available at SSRN: https://ssrn.com/abstract=4381617 or http://dx.doi.org/10.2139/ssrn.4381617

Helena Bach

University of Geneva

Pietro Campa

University of Geneva

Giacomo De Giorgi

University College London ( email )

Gower Street
London
United Kingdom

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Jaromir Nosal (Contact Author)

Boston College

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Davide Pietrobon

Lund University School of Economics and Management ( email )

Lund

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
123
Abstract Views
487
Rank
486,634
PlumX Metrics