DOI: 10.1162/rest.a.1880 ISSN: 0034-6535
The Equilibrium Effect of Information in Consumer Credit Markets: Public Records and Credit Redistribution
Scott L. Fulford, Éva NagypálAbstract
Information is central to consumer credit, but little is known about its equilibrium effects. We study a 2017 natural experiment in which non-bankruptcy public records were purged from U.S. credit reports. The large information-removal differences across states allow us to identify equilibrium impacts. Available credit increased for consumers who lost negative information directly. Consistent with our model, available credit declined indirectly for consumers who did not lose the negative information because they could no longer distinguish themselves. The direct and indirect effects nearly canceled, so the net equilibrium effect after a year was nearly zero but with substantial redistribution.