More than 45 million U.S. adults lack traditional credit histories, creating a gap that alternative financial service data, such as payday lending records, could potentially fill. Using the staggered adoption of the largest alternative credit database, we examine the data’s impact on automotive lenders in the subprime auto loan market. Alternative credit scores predict loan performance, leading lenders to offer better loan terms to higher scoring borrowers. However, a history of using alternative financial services, even with relatively high alternative credit scores, comes with significant downsides: borrowers with payday loans histories experience higher delinquency rates, face higher interest rates, and reduced loan origination rates after the adoption of the alternative credit data. A flexible machine learning model indicates that only 6% of alternative financial service users possess sufficiently strong credit histories to offset the stigma of using these services. Consequently, alternative credit data limits credit availability and raises traditional loan costs for most users of alternative financial services. Alternative financial services are more commonly used in lower-income areas and communities with higher shares of Black residents, raising concerns that the adoption of alternative credit data may have disproportionate negative impacts on these populations. Our results contribute to the policy debate on credit data, consumer privacy, and financial inclusion.

We examine the private information held by nonbank lenders in leveraged loan syndications. In these transactions, lead banks gather information about participant demand during bookbuilding and incorporate it into loan spread adjustments. A one-percentage-point increase in the loan spread during bookbuilding is associated with a 3% higher probability of subsequent default – but only in deals where participants plausibly have information. This suggests that nonbank syndicate participants’ demand conveys information about borrower credit quality unknown to the lead bank before bookbuilding. Our results challenge the conventional view of information asymmetries between banks and nonbank lenders, instead highlighting an element of information complementarity in modern corporate lending.

We study how bank specialization in lending to new firms affects firm creation, financing, and survival by exploiting a Portuguese reform that reduced entry barriers across municipalities over time. While this staggered deregulation significantly increased business entry, its local impact strongly depends on the pre-reform presence of bank branches specialized in lending to new firms. A greater presence of such specialized branches is associated with more firm entry and more credit access. The knowledge acquired by specialized lenders allows them to more thoroughly screen the new firms created after the reform. Their borrowers show higher profitability, lower default rates, and better survival prospects than firms funded by non-specialized branches. Our findings highlight how specialized lenders can help achieve deregulation objectives while maintaining financial stability.