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Credit scores, race, and residential sorting
Author(s) -
Nelson Ashlyn Aiko
Publication year - 2009
Publication title -
journal of policy analysis and management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.898
H-Index - 84
eISSN - 1520-6688
pISSN - 0276-8739
DOI - 10.1002/pam.20478
Subject(s) - credit score , metropolitan area , sorting , purchasing , consumption (sociology) , purchasing power , credit history , discrete choice , transaction data , race (biology) , business , economics , demographic economics , actuarial science , econometrics , database transaction , finance , marketing , geography , computer science , database , social science , botany , archaeology , sociology , biology , programming language , keynesian economics
Credit scores have a profound impact on home purchasing power and mortgage pricing, yet little is known about how credit scores influence households' residential location decisions. This study estimates the effects of credit scores on residential sorting behavior using a novel mortgage industry data set combining household demographic, credit, and financial data with property location information and detailed community attribute data. I employ the data set to estimate a discrete‐choice residential sorting model. I find that credit scores significantly predict residential sorting behavior and models that do not account for credit score provide biased estimates of housing utilities for black households in particular. Simulation results show that increases in credit score are associated with increases in the consumption of higher‐priced homes in more expensive school districts, higher‐quality public schools, and proximity to urban/metropolitan areas. © 2010 by the Association for Public Policy Analysis and Management.