We use the U.S. Federal Reserve Survey of Household Economics and Decisionmaking from 2017 to 2022 to study how financial knowledge affects borrower discouragement. Our results show that financial knowledge lowers the likelihood of borrower discouragement. However, this effect is not significant for different lending attitudes in our sub-sample analyses. We find that self-employment, gender and race are important predictors of borrower discouragement, and their effects are generally robust to the inclusion of financial knowledge. However, we also report some variations of these effects across sub-samples. We conduct several robustness tests and control for sample self-selection.
