Life after (soft) default

Giacomo De Giorgi and Costanza Naguib

European Economic Review, 2024, vol. 167, issue C

Abstract: Soft default, defined as a delinquency of 90 days or more, is a relatively common event in the credit market, in 2010 such episodes affected about 3 million individuals. Yet we lack a detailed understanding of what happens afterward. We use credit report data, on approximately 2 million individuals from 2004 to 2020, to shed light on individual trajectories after such event, and document enduring negative impacts. These effects persist for up to ten years post-event and manifest in lower credit scores, reduced total credit limits, lower homeownership rates, lower income, and relocation to less economically active zip codes. It appears that those who are overextended in their mortgage lines, and with larger delinquent amounts, suffer the harshest consequences.

Keywords: Default; Credit; Income; Mobility (search for similar items in EconPapers)
JEL-codes: D12 G51 J61 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:167:y:2024:i:c:s0014292124001223

DOI: 10.1016/j.euroecorev.2024.104793

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