How accurately do consumers report their debts in household surveys?

Summary

Focus

Household finance surveys are used across many central banks to measure families' net worth, indebtedness and default risks. These surveys are especially important in countries where non-bank lenders have a substantial presence and where official sources may not measure all the loan obligations of individual families. Furthermore, growth in household debt is strongly associated with a higher probability of banking crises, showing the need for reliable data on this topic.

Contribution

I study differences between self-reported debts via household surveys and official records using a matched data set from survey respondents and administrative banking loans in Chile. This is the first study comparing loans reported in surveys and those in official registries using a national representative sample and with information on all bank loans. Furthermore, I focus on debt differences between surveys and official records across individual borrowers, showing differences according to families' backgrounds.

Findings

I find significant differences between survey answers and official records in the number of loans and debt amounts reported. Discrepancies for debt amounts range from -31% to 18% for mortgages and from -1% to 59% for consumer instalment loans. Borrowers accurately report their loan maturities and delinquency status. Larger discrepancies between survey answers and official records are associated with respondents that have a lower income and are younger relative to other family members. Finally, I show that rounding answers can explain a significant part of these discrepancies.

Abstract

This article advances upon previous studies by using a unique match of a representative sample of individual borrowers from the Chilean Household Finance Survey and their banking loan records. I show that surveys differ from the credit registry, not just in the number of loans reported, but also in their amount, with a substantial degree of heterogeneity. Delinquency status is accurately reported by survey respondents. Furthermore, a substantial fraction of the discrepancies can be explained by rounding error in survey answers. Finally, I find that discrepancies are larger when respondents are not the highest-income member of the family.

JEL classification: C81, D10, D12, E21, G21

Keywords: household finance surveys, mortgages, consumer credit, default, measurement error