Credit Access in the United States

We measure differences in US households’ access to credit and explore the mechanisms driving such differences using newly constructed population-level linked credit bureau and Census data. We find large differences in credit scores by race, class, and hometown that emerge in one’s 20s and persist throughout the life cycle. These gaps are primarily driven by differences in delinquencies that emerge in young adulthood. By age 30, 73% of Black individuals, 62% of those from low-income families, and 51% of those from Appalachia and the South have a 90+ day delinquency on their credit report, in contrast to 36% for White individuals, 20% for high-income families, and 31% for those from the upper Midwest. These delinquencies are correlated with income and wealth, but observed income profiles and wealth account for at most 10–35% of the gaps in delinquencies across groups. In contrast, movers-based estimates of hometown effects imply that childhood exposure accounts for around 50% of the differences in delinquencies across hometowns. Counties that promote repayment also promote upward income mobility, but adult income mediates only a small fraction of this relationship: growing up in a place where others are likely to repay improves credit outcomes even for those who do not have higher income in adulthood. We provide suggestive evidence on the mechanisms driving these patterns. JEL Codes: G5, H0.