Code for: The Extension of Credit with Non-Exclusive Contracts and Sequential Banking Externalities

Non-exclusive sequential borrowing can increase default and impose externalities on prior lenders. We document that sequential banking is pervasive and its effects substantial. Using credit card applications from a large bank and data on the applicants' entire loan portfolios, we find that an additional credit line causes a 5.9 percentage point decline in default for high credit-score borrowers on previously existing loans. However, for low-score borrowers, it causes a 19 percentage point increase. The former use the new credit to smooth payments on preexisting loans, while the latter increase their total debt. These results have implications for "no-universal-default'' regulation and financial inclusion.