Building Credit Histories

Natalia Kovrijnykh, Igor Livshits and Ariel Zetlin-Jones

No 26-17, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: This paper investigates how new borrowers expand their credit access. In particular, we examine the role that consumers’ credit choices, not just repayment behavior, play in building their credit histories. Using credit bureau data, we document that incumbent lenders typically increase credit limits for borrowers who open additional credit cards. This effect is especially pronounced for new borrowers. Our interpretation of this evidence is that lenders perceive credit offered by other lenders as revealing favorable information about the borrower. We build a novel model consistent with this hypothesis and show that the model’s predictions are consistent with the data.

Keywords: Emerging Borrowers; Credit History; Information Aggregation; Debt Dilution (search for similar items in EconPapers)
JEL-codes: D14 D82 D83 D86 G21 (search for similar items in EconPapers)
Pages: 108
Date: 2026-03-26
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedpwp:102941

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DOI: 10.21799/frbp.wp.2026.17

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