The Effect of Credit Scoring on Small-Business Lending

This paper examines the effect of credit scoring on small-business lending for a sample of large U.S. banking organizations. We find that credit scoring is associated with an 8.4 percent increase in the portfolio share of small-business loans, or $4 billion per institution. However, we fail to uncov...

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Veröffentlicht in:	Journal of money, credit and banking credit and banking, 2001-08, Vol.33 (3), p.813-825
Hauptverfasser:	Frame, W. Scott, Srinivasan, Aruna, Woosley, Lynn
Format:	Artikel
Sprache:	eng
Schlagworte:	Antitrust Bank accounts Bank acquisitions & mergers Bank assets Bank credit Bank loans Banking Banking industry Banks Branch banking Business enterprises Business financing Central banks Commercial banks Commercial loans Corporations Costs Credit Credit market Credit scoring Economics Federal Reserve Bank Finance Financial services GDP Gross Domestic Product Hypothesis Lenders Lines of credit Loans Market entry Polls & surveys Product lines Regression analysis Services Small and medium sized enterprises Small business Small business loans Small businesses Standard deviation Studies U.S.A Universal banking
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Beschreibung
Zusammenfassung:	This paper examines the effect of credit scoring on small-business lending for a sample of large U.S. banking organizations. We find that credit scoring is associated with an 8.4 percent increase in the portfolio share of small-business loans, or $4 billion per institution. However, we fail to uncover any specific attributes of bank small-business credit-scoring programs that lead to this increased lending. Overall, we conclude that credit scoring lowers information costs between borrowers and lenders, thereby reducing the value of traditional, local bank lending relationships.
ISSN:	0022-2879 1538-4616
DOI:	10.2307/2673896