Bad credit history is the dominant reason for mortgage rejection. Exploiting the 2004 nationwide extension of local laws existing in seven U.S. states that allowed free credit reports, I document that cost reduction of reports for consumers resulted in increased mortgage demand, approval ratio and first-time homebuyers; and decreased defaults, persisting through the 2008 financial crisis. Consistent with a demand-pull (rather than a supply-push) effect, mortgages became costlier. Moreover, higher approvals, reflecting an improved borrower pool, occurred mainly among prime, more educated, and bottom income quartile consumers. Results emphasize that cheaper credit history information to consumers improves credit market outcomes.
Keywords: Credit Reports, Information Provision, Household Finance, Retail Mortgage Market.
JEL Classification: G21, G28, D83
