A Competitive Theory of Credit Scoring

Satyajit Chatterjee () and P. Dean Corbae ()

No 823, 2004 Meeting Papers from Society for Economic Dynamics

Abstract: We study how credit scoring impacts the ability of individuals to consumption smooth. Our environment has ex-ante heterogeneity of household types. Credit scoring is interpreted as an intermediary's posterior of a household's type conditional on its bankruptcy and borrowing decisions. The inference problem is whether an observed defaulter is a good type with a bad earnings realization or a bad type. Default adversely affects an agent's credit score and endogenously limits the household's access to unsecured credit

Keywords: Credit Scoring; Default (search for similar items in EconPapers)
JEL-codes: E21 (search for similar items in EconPapers)
Date: Written

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Persistent link: http://EconPapers.repec.org/RePEc:red:sed004:823

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