IN THIS LESSON

Credit reporting is a critical part of the financial system in most developed economies but is often weak or absent in developing countries.
It addresses a fundamental problem of credit markets: asymmetric information between borrowers and lenders that can lead to adverse selection and moral hazard.
The heart of a credit report is the record it provides of an individual's or a firm's payment history, which:
- enables lenders to evaluate credit risk more accurately and lower loan processing time and costs.
- strengthen borrower discipline since nonpayment with one institution results in sanctions with others.
- significantly contributes to predicting the default risk of potential borrowers, which promotes increased lending activity.

Lesson 3: Credit’s Role in the US/Global Economy