Credit Scores and Inequality across the Life Cycle

Satyajit Chatterjee (), Dean Corbae, Kyle Dempsey and José-Víctor Ríos-Rull

No 26-07, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: Credit scores are a primary screening device for the allocation of credit, housing, and sometimes even employment. In the data, credit scores grow and fan out with age; at the same time, income and consumption inequality also increase with a cohort’s age. We postulate a simple model with hidden information to explore the joint determination of credit scores, income, and consumption over an individual’s lifetime which can replicate these empirical facts. We use the model to understand the role of technologies like big data or legal restrictions limiting information on certain adverse events like medical expenses intended to increase credit market access.

Keywords: Adverse Selection; Moral Hazard; Bayesian Learning; Reputation (search for similar items in EconPapers)
JEL-codes: D82 E21 G51 (search for similar items in EconPapers)
Pages: 63
Date: 2026-02-05
New Economics Papers: this item is included in nep-dge
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Related works:
Chapter: Credit Scores and Inequality Across the Life Cycle (2025)
Working Paper: Credit Scores and Inequality across the Life Cycle (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedpwp:102408

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DOI: 10.21799/frbp.wp.2026.07

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