Premium
Credit Use of U.S. Households after the Great Recession: The Role of Credit Constraint
Author(s) -
Kim Kyoung Tae,
Wilmarth Melissa J.,
Choi Shinae
Publication year - 2016
Publication title -
family and consumer sciences research journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.372
H-Index - 31
eISSN - 1552-3934
pISSN - 1077-727X
DOI - 10.1111/fcsr.12143
Subject(s) - credit card , constraint (computer aided design) , credit history , loan , credit reference , recession , debt , credit card interest , credit crunch , economics , installment credit , sample (material) , household debt , monetary economics , credit enhancement , business , finance , credit risk , payment , macroeconomics , mechanical engineering , chemistry , chromatography , engineering
This study investigated the relationship between credit constraint and credit use of U.S. households after the Great Recession using the 2010 and 2013 Survey of Consumer Finances datasets. When both datasets were used for analysis, the size of the sample was 12,497 households. Credit use was investigated for the following: (i) installment loan debt and (ii) outstanding credit card balances. A household was categorized as credit‐constrained if the household had been turned down for credit in the past five years or if the household was discouraged from applying for credit. Results of the analyses using a Heckman selection model indicated that households experiencing credit constraint were 13.62% more likely to hold installment loans and to have larger loan amounts than those not experiencing credit constraint. Also, constrained households were 6.65% more likely to hold outstanding credit card balances, but those households had smaller outstanding credit card balances than households who were not experiencing credit constraint. In other words, there were higher rates of credit use among households experiencing credit constraint. This could be the result of past credit use instead of inability to borrow.