Are young borrowers bad borrowers? Evidence from the Credit CARD Act of 2009

Peter Debbaut, Andra Ghent and Marianna Kudlyak

No 13-09, Working Paper from Federal Reserve Bank of Richmond

Abstract: Young borrowers are the least experienced financially and, conventionally, thought to be most prone to financial mistakes. We study the relationship between age and financial problems related to credit cards. Our results challenge the notion that young borrowers are bad borrowers. We show that young borrowers are among the least likely to experience a serious credit card default. We then exploit the 2009 CARD Act to identify which individuals self-select into obtaining a credit card early in life. We find that individuals who choose early credit card use default less and are more likely to get a mortgage while young.

Date: 2013
New Economics Papers: this item is included in nep-ban, nep-dem, nep-lam, nep-ltv, nep-neu and nep-rmg
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Working Paper: Are Young Borrowers Bad Borrowers? Evidence from the Credit CARD Act of 2009 (2014)
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