Informational Synergies in Consumer Credit

Lenders can tap into multiple sources of private information to assess consumer credit risk but little is known about the informational synergies between these sources. Using more than 1.7 million monthly observations from checking accounts and credit card accounts of the same individuals during 2007-2014, we find that activity measures from both accounts contain information beyond credit scores and many other controls. Checking accounts display warning indications earlier and more accurately than credit card accounts. Default predictions based on different sources of information exhibit a positive but imperfect correlation of 0.55. Interestingly, type I default prediction errors decrease by 33% when lenders consider information from both sources. The evidence suggests sizeable informational synergies that lenders can exploit to manage credit risk and customer relationships.