Informational synergies in consumer credit |
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| Institution: | 1. University of Duisburg-Essen, Lotharstr. 65, 47057 Duisburg, Germany;2. Brazilian School of Public and Business Administration, Getulio Vargas Foundation, Rua Jornalista Orlando Dantas 30, 22231-010 Rio de Janeiro, Brazil;3. Braunschweig Institute of Technology, Abt-Jerusalem-Str. 7, 38106 Braunschweig, Germany;1. Florida Atlantic University, Boca Raton, FL 33431, United States;2. University of Wisconsin-Milwaukee, Milwaukee, WI 53211, United States;3. U.S. Securities and Exchange Commission, Washington, D.C., 20549, United States;1. Lumsa University, Rome;2. Michigan State University, Department of Economics, Marshall-Adams Hall, 486 W Circle Dr. Rm 110, East Lansing, MI 48824, USA;3. Luiss University, Rome;1. Smeal College of Business, The Pennsylvania State University, 381 Business Building, University Park, PA 16802, USA;2. Department of Finance, National University of Singapore, Singapore;3. J. Mack Robinson College of Business, Georgia State University, USA;1. Bank for International Settlements, Switzerland;2. Central Bank of Brazil, Brazil;3. Bank for International Settlements, Mexico and Central Bank of Brazil, Brazil |
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| Abstract: | We investigate whether lenders can realize informational synergies by simultaneously obtaining private information from different accounts of the same borrower. Synergies exist if such information is complementary to each other. We focus on consumer credit, using 3.5 million observations from checking accounts and credit card accounts of the same individuals during 2007–2014. First, activity from both accounts is complementary for estimating consumer default beyond credit scores, borrower characteristics and relationship characteristics. Checking accounts display warning indications about consumer default earlier and more accurately than credit card accounts. Second, decision errors are lower when lenders consider cross-product information. The evidence suggests significant informational synergies that are important for the supply and allocation of credit. |
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