A credit to your clinic: steps practitioners can take towards a good report

Having a good credit report can make all the difference when it comes to sourcing commercial funding or being granted good terms from suppliers. Adam Bernstein looks at the steps that clinics can take to improve their standing.

The Marginal Propensity to Consume over the Business Cycle

We estimate how the marginal propensity to consume (MPC) out of liquidity varies over the business cycle. Ten years after a Chapter 7 bankruptcy, the bankruptcy flag is removed from the filer’s credit report, generating an increase in credit score. In the year following flag removal, credit card limits increase by $778 and credit card balances increase by $290, implying an MPC of 0.37. Using cohorts of flag removals, we find that the MPC was 20 to 30 percent higher during the Great Recession, increased during the 2001 recession, and is positively correlated with the local unemployment rate. (JEL E21, E24, E32, G51)

Disparate Impact? Race, Sex, and Credit Reports in Hiring

Half of U.S. employers consider credit history when deciding whom to hire. The practice has become a contentious policy issue, with multiple jurisdictions limiting the use of credit reports in employment. Yet to date, there has been no test of how the introduction of credit history influences the way employers make decisions. Recent qualitative research finds that employers evaluate credit reports in contingent and person-specific ways, which opens the door to bias according to applicant characteristics, such as race and sex. To test for potential disparate impact in employment outcomes from the use of credit reports, we conduct a survey experiment with 1,050 hiring professionals. We find that including a bad credit report in an applicant’s file reduces respondents’ likelihood of hiring female (vs. male) applicants and reduces the recommended starting salary offered to black (vs. white) applicants. We discuss the implications of this study for research and public policy.

AN OVERVIEW OF CREDIT REPORT/CREDIT SCORE MODELS AND A PROPOSAL FOR VIETNAM

Having a national credit database system would help financial institutions (FIs) reduce credit risk and reduce non-recovered bad debts. The government will feel at ease when FIs and the people are protected from bad debts in a sustainably developing and transparent market. On the other hand, borrowers will also receive benefit. Those who have good credit history will be provided with a more favorable interest rate and less requirements, or even without collateral. In 2014 the Vietnam National Assembly passed the Citizen Identity Law, which requires the government to issue a unique lifetime personal identification number for each citizen (starting 2016). This will play a crucial role in building a national credit database system. In this article we will give an overview of credit report and credit score models, mainly in the United States. Based on that, we draft a detailed proposal for a national credit database system which can be implemented in Vietnam.