Divorce and Credit

Does failure in a marriage foretell a failure to repay credit? Analyzing the retail loan portfolio of a representative bank, we find no significant difference in probability of default between divorcees and others, but do find evidence for taste-based discrimination. Divorcees pay 5.8 basis points more in interest than non-divorced peers. This discrimination is greater in regions where clan culture is more dominant, and among loan officers who are male, are older, and have been longer on the job. Such discrimination is reduced if the loan officers are better educated, and if competition in local banking market is fiercer.