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A Competitive Theory of Credit Scoring


  • Satyajit Chatterjee
  • Dean Corbae


We study how credit scoring impacts the ability of individuals to consumption smooth. Our environment has ex-ante heterogeneity of household types. Credit scoring is interpreted as an intermediary's posterior of a household's type conditional on its bankruptcy and borrowing decisions. The inference problem is whether an observed defaulter is a good type with a bad earnings realization or a bad type. Default adversely affects an agent's credit score and endogenously limits the household's access to unsecured credit

Suggested Citation

  • Satyajit Chatterjee & Dean Corbae, 2004. "A Competitive Theory of Credit Scoring," 2004 Meeting Papers 823, Society for Economic Dynamics.
  • Handle: RePEc:red:sed004:823

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    References listed on IDEAS

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    Cited by:

    1. Athreya, Kartik & Tam, Xuan S. & Young, Eric R., 2009. "Unsecured credit markets are not insurance markets," Journal of Monetary Economics, Elsevier, vol. 56(1), pages 83-103, January.

    More about this item


    Credit Scoring; Default;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth


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