Stability in Consumer Credit Scores: Level and Direction of FICO Score Drift as a Precursor to Mortgage Default and Prepayment

Abstract I study strategic behavior under credit-based insurance.' It is assumed that higher consumer credit scores are associated with lower risk for insurable losses. Even when default is costless, some borrowers repay loans as a signal of low risk-type to insurers. There are multiple equilibria and equilibrium refinement techniques have no bite. The equilibrium amount of debt is indeterminate. For low credit scores, equilibrium involves randomization between default and repayment. This can explain the hockey-stick' shape of interest rates observed in several markets. Perfect information about consumer risk-type can lead to credit-market failure and lower welfare.

Download Full-text

Minimum Wages and Consumer Credit: Effects on Access and Borrowing

Review of Financial Studies ◽

10.1093/rfs/hhaa091 ◽

2020 ◽

Author(s):

Lisa J Dettling ◽

Joanne W Hsu

Keyword(s):

Direct Effect ◽

Credit Markets ◽

Consumer Credit ◽

Cost Savings ◽

Spillover Effects ◽

Minimum Wages ◽

Disposable Income ◽

Positive Spillover ◽

Credit Scores ◽

The Cost

Abstract This paper examines how minimum wages affect lender and borrower interactions with consumer credit markets. We find that higher state minimum wages increase the supply of unsecured credit, reduce payday loan usage, decrease delinquency, and increase credit scores. Overall, minimum wages reduce borrowing costs and have positive spillover effects on disposable income and liquidity. A back-of-the-envelope of the cost savings indicates that higher minimum wages increase disposable income by 1.3% more than implied by estimates of the direct effect on earnings.

Download Full-text

Consumer credit, chronic disease and risk behaviours

Journal of Epidemiology & Community Health ◽

10.1136/jech-2018-211160 ◽

2018 ◽

Vol 73 (1) ◽

pp. 73-78

Author(s):

Lorraine T Dean ◽

Emily A Knapp ◽

Sevly Snguon ◽

Yusuf Ransome ◽

Dima M Qato ◽

...

Keyword(s):

Chronic Disease ◽

Chronic Diseases ◽

Salt Intake ◽

Disease Risk ◽

Consumer Credit ◽

Health Behaviours ◽

Credit Score ◽

Increased Risk ◽

Credit Scores ◽

Zip Code

BackgroundCredit scores have been identified as a marker of disease burden. This study investigated credit scores’ association with chronic diseases and health behaviours that are associated with chronic diseases.MethodsThis cross-sectional analysis included data on 2083 residents of Philadelphia, Pennsylvania, USA in 2015. Nine-digit ZIP code level FICO credit scores were appended to individual self-reported chronic diseases (obesity, diabetes, hypertension) and related health behaviours (smoking, exercise, and salt intake and medication adherence among those with hypertension). Models adjusted for individual-level and area-level demographics and retail pharmacy accessibility.ResultsMedian ZIP code credit score was 665 (SD=58). In adjusted models, each 50-point increase in ZIP code credit score was significantly associated with: 8% lower chronic disease risk; 6% lower overweight/obesity risk, 19% lower diabetes risk; 9% lower hypertension risk and 14% lower smoking risk. Other health behaviours were not significantly associated. Compared with high prime credit, subprime credit score was significantly associated with a 15%–70% increased risk of chronic disease, following a dose–response pattern with a prime rating.ConclusionLower area level credit scores may be associated with greater chronic disease prevalence but not necessarily with related health behaviours. Area-level consumer credit may make a novel contribution to identifying chronic disease patterns.

Download Full-text

Does the Age at Which a Consumer Gets Their First Credit Matter? Credit Bureau Entry Age and First Credit Type Effects on Credit Score

FEDS Notes ◽

10.17016/2380-7172.2918 ◽

2021 ◽

Vol 2021 (2918) ◽

Author(s):

Lucas Nathe ◽

Keyword(s):

Consumer Credit ◽

Credit Market ◽

Key Factors ◽

Access To Credit ◽

Credit Score ◽

Credit Scores ◽

Credit Bureau ◽

Entry Age

The consumer credit market plays a prominent role in the financial life of U.S. households. Consumers' credit histories and, in particular their credit scores, are key factors that determine their access to credit and the price at which they borrow.

Download Full-text