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Federal Reserve Bank of Atlanta
FRB Atlanta Working Paper
Credit scoring and the availability, price, and risk of small business credit
Allen N. Berger
W. Scott Frame
Nathan H. Miller
Abstract

The authors examine the economic effects of small business credit scoring (SBCS) and find that it is associated with expanded quantities, higher average prices, and greater risk levels for small business credits under $100,000. These findings are consistent with a net increase in lending to relatively risky “marginal borrowers” who would otherwise not receive credit, but who would pay relatively high prices when they are funded. The authors also find that 1) bank-specific and industrywide learning curves are important; 2) SBCS effects differ for banks that adhere to “rules” versus “discretion” in using the technology; and 3) SBCS effects differ for slightly larger credits.


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Allen N. Berger & W. Scott Frame & Nathan H. Miller, Credit scoring and the availability, price, and risk of small business credit, Federal Reserve Bank of Atlanta, FRB Atlanta Working Paper 2002-6, 2002.
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Keywords: Credit scoring systems ; Small business
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