We construct new population-level linked administrative data to study households’ access to credit in the United States. These data reveal large differences in credit access by race, class, and hometown. By age 25, Black individuals, those who grew up in low-income families, and those who grew up in certain areas (including the Southeast and Appalachia) have significantly lower credit scores than other groups. Consistent with lower scores generating credit constraints, these individuals have smaller balances, more credit inquiries, higher credit card utilization rates, and greater use of alternative higher-cost forms of credit. Tests for alternative definitions of algorithmic bias in credit scores yield results in opposite directions. From a calibration perspective, group-level differences in credit scores understate differences in delinquency: conditional on a given credit score, Black individuals and those from low-income families fall delinquent at relatively higher rates. From a balance perspective, these groups receive lower credit scores even when comparing those with the same future repayment behavior. Addressing both of these biases and expanding credit access to groups with lower credit scores requires addressing group-level differences in delinquency rates. These delinquencies emerge soon after individuals access credit in their early twenties, often due to missed payments on credit cards, student loans, and other bills. Comprehensive measures of individuals’ income profiles, income volatility, and observed wealth explain only a small portion of these repayment gaps. In contrast, we find that the large variation in repayment across hometowns mostly reflects the causal effect of childhood exposure to these places. Places that promote upward income mobility also promote repayment and expand credit access even conditional on income, suggesting that common place-level factors may drive behaviors in both credit and labor markets. We discuss suggestive evidence for several mechanisms that drive our results, including the role of social and cultural capital. We conclude that gaps in credit access by race, class, and hometown have roots in childhood environments.

US homeowning households tend to be less geographically mobile than households that do not own a home. However, it is unknown whether the inducement to move from a legal process that makes foreclosure more likely on the margin can lead households to make beneficial moves even under adverse circumstances. This paper documents how foreclosure process affects the outcomes of US households through location. I link mortgage and foreclosure deeds and property characteristics with residential moves of US households and their corresponding neighborhood characteristics. Variation in the foreclosure process used across US states puts observably similar households at greater risk of foreclosure in those that follow a nonjudicial (faster and cheaper for lender) rather than judicial (slower and more expensive) process. I use the resultant variation in foreclosure rates across borders in a spatial regression discontinuity design (RDD) to estimate local average treatment effects of nonjudicial foreclosure process and, incorporating two-stage least squares, of being foreclosed. Under a nonjudicial foreclosure process, households are more likely to be foreclosed (2 pp), to move out of their home (3 pp), and to undertake more distant moves (2 pp). Moves come not only from completed foreclosures but also from preventative moves by households at risk of foreclosure. Furthermore, households experience relatively greater increases in destination relative to origin tract median income ($1,000) and household income rank at age 29 of children who grew up there (0.5 percentile) under a nonjudicial rather than judicial foreclosure process. Together these results suggest that any potential long-term negative effects of foreclosure on household members are not driven by adverse changes in neighborhood characteristics.

Revenue from checking account overdraft fees has been accounting for an ever-increasing share of consumer checking account fees. We study the determinants of overdraft fees using a unique dataset of confidential supervisory information covering several large banks that contains every transaction that a fraction of the banks’ account holders undertook over an 18-month period. Fixed-effects panel regressions recover within-person variation in overdraft fees as a function of account tenure and other time-varying characteristics. Our estimates imply that, for accounts opted into overdraft coverage, overdraft fees increase by about 20% over the first year of account ownership. We find no such effect for accounts opted out. We use only months in which a consumer was eligible for overdraft, so our results cannot be attributed to gaining eligibility for overdraft. We also present novel results on the relationship between within-person variation in overdraft activity and a consumer’s overdraft limit, linked and unlinked deposit and credit account balances, measures of account activity, and average daily balances. We also provide evidence that there is persistence in monthly overdraft fees even after controlling for account activity. Results are qualitatively similar using the probability of incurring fees rather than the level of fees. Findings are robust to top-coding of outliers and to splitting the sample by overdraft intensity. We discuss possible explanations including a limited attention model in which consumer attention to overdraft is focused by opening a new account and declines thereafter.