Private Credit Bureaus and Positive Information Sharing: Effects on credit cost?

José Ornelas, Raquel Oliveira and Ricardo Schechtman

No 624, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: This study exploits a legal change in Brazil to identify the extent to which new information generated by credit bureaus translates into different loan interest rates. The legal change enabled private credit bureaus (PCBs) to build new credit scores for approximately 100 million individuals, based on a broader scope of positive information, such as loan flow and repayment patterns. We find an average reduction of 3.7% in the interest rates of personal loans to borrowers whose new scores became available for sale by the PCBs. The effects are stronger in the cases where the new score is much higher than the old score, reaching an average reduction of 8.7%. We find stronger results for new clients and for private banks. The mechanisms behind our results include both the reassessment of borrower credit risk and higher competition among lenders coming from the dissemination of new positive information. We also provide empirical evidence consistent with information sharing reducing the ability of lenders to informationally lock-in their borrowers.

Date: 2025-06
New Economics Papers: this item is included in nep-fdg
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.bcb.gov.br/content/publicacoes/WorkingPaperSeries/WP624v3.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bcb:wpaper:624

Access Statistics for this paper

More papers in Working Papers Series from Central Bank of Brazil, Research Department
Bibliographic data for series maintained by Rodrigo Barbone Gonzalez ().