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Credit Scores and Committed Relationships

Author

Listed:
  • Dokko, Jane

    (Brookings Institution)

  • Li, Geng

    () (Board of Governors of the Federal Reserve System (U.S.))

  • Hayes, Jessica

    (UCLA)

Abstract

This paper presents novel evidence on the role of credit scores in the dynamics of committed relationships. We document substantial positive assortative matching with respect to credit scores, even when controlling for other socioeconomic and demographic characteristics. As a result, individual-level differences in access to credit are largely preserved at the household level. Moreover, we find that the couples' average level of and the match quality in credit scores, measured at the time of relationship formation, are highly predictive of subsequent separations. This result arises, in part, because initial credit scores and match quality predict subsequent credit usage and financial distress, which in turn are correlated with relationship dissolution. Credit scores and match quality appear predictive of subsequent separations even beyond these credit channels, suggesting that credit scores reveal an individual's relationship skill and level of commitment. We present ancillary evidence supporting the interpretation of this skill as trustworthiness.

Suggested Citation

  • Dokko, Jane & Li, Geng & Hayes, Jessica, 2015. "Credit Scores and Committed Relationships," Finance and Economics Discussion Series 2015-81, Board of Governors of the Federal Reserve System (US).
  • Handle: RePEc:fip:fedgfe:2015-81
    DOI: 10.17016/FEDS.2015.081
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    File URL: http://dx.doi.org/10.17016/FEDS.2015.081
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    References listed on IDEAS

    as
    1. Dana Glei & Sara S. McLanahan & Irwin Garfinkel, 2002. "Assortative mating among unmarried parents: Implications for ability to pay child support," Journal of Population Economics, Springer;European Society for Population Economics, vol. 15(3), pages 417-432.
    2. Betsey Stevenson & Justin Wolfers, 2007. "Marriage and Divorce: Changes and their Driving Forces," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 27-52, Spring.
    3. Karlan, Dean S., 2005. "Using Experimental Economics to Measure Social Capital and Predict Financial Decisions," Center Discussion Papers 28429, Yale University, Economic Growth Center.
    4. Tal Gross & Matthew J. Notowidigdo & Jialan Wang, 2014. "Liquidity Constraints and Consumer Bankruptcy: Evidence from Tax Rebates," The Review of Economics and Statistics, MIT Press, vol. 96(3), pages 431-443, July.
    5. Dean Corbae & Andrew Glover & Daphne Chen, 2013. "Can Employer Credit Checks Create Poverty Traps?," 2013 Meeting Papers 875, Society for Economic Dynamics.
    6. repec:pri:rpdevs:gamespaper.pdf is not listed on IDEAS
    7. Ernst Fehr & Urs Fischbacher & Bernhard von Rosenbladt & J�rgen Schupp & Gert G. Wagner, "undated". "A Nation-Wide Laboratory: Examining trust and trustworthiness by integrating behavioral experiments into representative surveys," IEW - Working Papers 141, Institute for Empirical Research in Economics - University of Zurich.
    8. Dean S. Karlan, 2005. "Using Experimental Economics to Measure Social Capital and Predict Financial Decisions," American Economic Review, American Economic Association, vol. 95(5), pages 1688-1699, December.
    9. Becker, Gary S, 1973. "A Theory of Marriage: Part I," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 813-846, July-Aug..
    10. Dettling, Lisa J. & Hsu, Joanne W., 2014. "Returning to the Nest: Debt and Parental Co-residence Among Young Adults," Finance and Economics Discussion Series 2014-80, Board of Governors of the Federal Reserve System (US).
    11. Steven Ruggles, 1997. "The rise of divorce and separation in the United States, 1880–1990," Demography, Springer;Population Association of America (PAA), vol. 34(4), pages 455-466, November.
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    More about this item

    Keywords

    Credit scores; Committed relationships; Assortative matching; Household finance; Trustworthiness;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure

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