Credit Scores and Committed Relationships

Dokko, Jane K.; Hayes, Jessica; Li, Geng

doi:10.17016/FEDS.2015.081

Working Paper

Credit Scores and Committed Relationships

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.

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

JEL Classification: D14; G21; J12;

https://doi.org/10.17016/FEDS.2015.081