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Life after (Soft) Default

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Listed:
  • Giacomo De Giorgi
  • Costanza Naguib

Abstract

Soft default, defined as a delinquency of 90 days or more, is a relatively common event in the credit market, in 2010 such episodes affected about 3 million individuals. Yet we lack a detailed understanding of what happens afterward. We use credit report data, on approximately 2 million individuals from 2004 to 2020, to shed light on individual trajectories after such event, and document enduring negative impacts. These effects persist for up to ten years post-event and manifest in lower credit scores, reduced total credit limits, lower homeownership rates, lower income, and relocation to less economically active zip codes. It appears that those who are overextended in their mortgage lines, and with larger delinquent amounts, suffer the harshest consequences.

Suggested Citation

  • Giacomo De Giorgi & Costanza Naguib, 2023. "Life after (Soft) Default," Papers 2306.00574, arXiv.org, revised Apr 2024.
    • Handle: RePEc:arx:papers:2306.00574
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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