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.