What happens when we forget? The effect of removing adverse information on access to credit

- Policy to remove delinquent borrowers' credit history was implemented in Thailand.
- The policy was intended to allow borrowers to reenter formal credit markets.
- Contrary to theoretical prediction, we find no evidence of an expansion in credit.

In a world with asymmetric information, past information helps borrowers establish reputation and credibility. However, can less information be beneficial? Using a panel of nationally representative sample of borrowers' credit bureau information, we investigate the impact of the removal of adverse credit information for long-time delinquent borrowers in Thailand on their access to credit. The removal is a deliberated effort by policymakers to allow borrowers to reenter formal credit markets. Contrary to theoretical prediction, we find no evidence of a subsequent expansion in credit.