NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Jeremy Burke

University of Southern California
Center for Economic and Social Research (CESR)
1909 K St NW, Suite 530
Washington, DC 20006-1101

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: University of Southern California

NBER Working Papers and Publications

July 2019Credit Building or Credit Crumbling? A Credit Builder Loan’s Effects on Consumer Behavior, Credit Scores and Their Predictive Power
with Julian Jamison, Dean Karlan, Kata Mihaly, Jonathan Zinman: w26110
There is little evidence on how the large market for credit score improvement products affects consumers or credit market efficiency. A randomized encouragement design on a standard credit builder loan (CBL) identifies null average effects on whether consumers have a credit score and the score itself, with important heterogeneity: those with loans outstanding at baseline fare worse, those without fare better. Selection, treatment effect, and prediction models indicate the CBL reveals valuable information to markets, inducing positive selection and making credit histories more precise, while keeping credit scores’ predictive power intact. With modest targeting changes, CBLs could work as intended.
 
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