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Credit Scores and Inequality across the Life Cycle

Author

Listed:
  • Satyajit Chatterjee
  • Dean Corbae
  • Kyle Dempsey

  • José-Víctor Ríos-Rull

Abstract

Credit scores are a primary screening device for the allocation of credit, housing, and sometimes even employment. In the data, credit scores grow and fan out with age; at the same time, income and consumption inequality also increase with a cohort’s age. We postulate a simple model with hidden information to explore the joint determination of credit scores, income, and consumption over an individual’s lifetime which can replicate these empirical facts. We use the model to understand the role of technologies like big data or legal restrictions limiting information on certain adverse events like medical expenses intended to increase credit market access.

Suggested Citation

  • Satyajit Chatterjee & Dean Corbae & Kyle Dempsey & José-Víctor Ríos-Rull, 2026. "Credit Scores and Inequality across the Life Cycle," Working Papers 26-07, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:102408
    DOI: 10.21799/frbp.wp.2026.07
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    Keywords

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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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