System Working Paper 18-05

On Intergenerational Immobility: Evidence that Adult Credit Health Reflects the Childhood Environment

Sarena F. Goodman | Board of Governors of the Federal Reserve System
Alice Henriques | Board of Governors of the Federal Reserve System
Alvaro Mezza | Board of Governors of the Federal Reserve System

Published January 17, 2018

Using a novel dataset that links socioeconomic background to future credit, postsecondary education, and federal student loan and grant records, we document that, even though it is not and cannot be used by credit agencies in assigning risk, background is a strong predictor of adult credit health. A relationship remains upon inclusion of achievement, attainment, and debt management metrics. These findings reveal a new dimension along which childhood circumstances persist into adulthood and imply that the many important contexts in which credit scores are relied upon to evaluate individuals (e.g., lending, insurance, employment) may be helping to preserve inherited inequities.

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