The Effect of the Community Reinvestment Act on Consumers' Contact with Formal Credit Markets The Effect of the Community Reinvestment Act on Consumers' Contact with Formal Credit Markets

By Ana Patricia Muñoz and Kristin F. Butcher

Data on consumer credit outcomes from 2004 to 2012 reveal that individuals in low- to moderate-income neighborhoods that are eligible for the Community Reinvestment Act (CRA) show more contact with formal credit markets than those in very similar neighborhoods that do not qualify for CRA credit. Controlling for other factors that may drive contact with the credit markets, we demonstrate that individuals in CRA-eligible neighborhoods are more likely to be in the credit report data, are more likely to have a valid credit score, and have more accounts. Despite this increased contact with formal credit markets, which could put them at higher risk of a bad credit outcome, individuals in CRA-eligible neighborhoods have no greater levels of delinquency and do not show lower credit scores than their peers on the other side of the CRA eligibility threshold.