High-cost debt and perceived creditworthiness: Evidence from the UK

• 成果类型: Article
• 署名作者: Liberman, Andres; Paravisini, Daniel; Pathania, Vikram
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2021.07.005
• 发表日期: 2021
• 页码: 719-736
• 关键词: Consumer finance; Credit scores; Credit supply

摘要

We show that high-cost debt exacerbates financial constraints by affecting lenders' per-ception of credit risk. Using data from a high-cost lender in the UK, we show that high-cost credit reduces applicants' credit score and future bank credit even though it does not affect future debt repayment. These effects are not present among borrowers who are al -ready tagged as high risk at application, consistent with high-cost credit affecting lenders' beliefs about borrowers' creditworthiness. The results highlight a novel channel through which high-cost credit can harm consumers' financial health: a self-reinforcing stigma of high risk. (c) 2021 Published by Elsevier B.V.