Abstract
This paper investigates factors associated with high credit card loss rates during the period 2008–11 associated with the Great Recession. We examine default at the individual consumer (as opposed to the account) level. Using data available from consumer credit records for the period March 2000–March 2008, we develop and estimate segment-level logistic regression equations to predict default outcomes through 2013. The model fits the data very well in-sample but fails to accurately predict defaults out-of-sample for the Great Recession. On the one hand, default rates throughout the Great Recession are markedly underpredicted for prime consumers, especially those granted large credit limits during the credit expansion that characterized 2000–2008. On the other hand, default rates are overpredicted for subprime borrowers, indicating that lenders’ losses during the Great Recession would have been significantly larger if the repayment performance of subprime borrowers had aligned with extrapolation based on historical performance data.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
