Consumer Credit: Learning Your Customer's Default Risk from What (S)He Buys
53 Pages Posted: 15 Mar 2010
Date Written: November 24, 2009
Abstract
The paper contributes to understanding the economics of the big data revolution in consumer credit
scoring. I link consumer spending patterns (what consumers buy) to consumer credit outcomes using survey data from the US Consumer Expenditure Survey and account-level data from a Mexican retail chain that sells durables on credit. In both datasets, spending on entertainment (such as video, audio, magazines, newspapers, toys and pets) predicts worse credit outcomes. Spending on categories that predict worse consumer credit outcomes tend to also predict smoking and lower education (proxies for impatience), suggesting that impatience is central for consumer credit outcomes.
Keywords: Consumer credit, default
JEL Classification: D1
Suggested Citation: Suggested Citation
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