This study exploits a legal change in Brazil to identify the extent to which new information generated by credit bureaus translates into different loan interest rates. The legal change enabled the private credit bureaus (PCBs) to build new credit scores based on a broader scope of positive information, such as patterns of loan flows and repayments. We find an average reduction of 3.7% in the interest rates of personal loans to borrowers whose new scores were available for sale by the PCBs, compared to borrowers who only had old credit scores available. The effects are stronger in the cases where the new score is much higher than the old score, reaching an average reduction of 8.7%. We also find stronger results for new clients and for private banks. We also provide empirical evidence that information sharing can lower the ability of lenders to informationally capture their clients and extract rents.
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