In the credit market we assume that, at the beginning of the relationship, the debtors are not equal and still withholds more information that the creditors. In fact the different types of debtors have different probabilities to pay its loans. As Mishkin (2000) the problem of adverse election happens before the transaction occurring: high borrowers with credit risk are the ones that more actively they search for loans. Therefore, the contracting parties that more probably will produce a result undesirable are also the ones that had been more probably felt made use to participate of the transaction. In the measure where the adverse election increases the probability of a loan to be granted to a bad debtor, the institutions can decide not to grant to loan some, or to grant to loans the interests highest, exactly having good risks of credit in the market. As Bebczuk (2000) the adverse election in the credit market occurs when the creditor is not capable to distinguish between projects with different levels of risk at the moment to format the oan agreement. After signed the contract, the creditor prefers projects less risky, while the debtor prefers the opposite.
In this context the entrepreneurs detainers of risky projects find convenient to occult the true nature of the project, being explored the relative disinformation of the creditor. For Cosci (1993) an important difference between the debtors is its different degrees of optimism and pessimism. Cosci considers that wing optimists will go to overestimate its proper probability of success, will make what to accept them higher taxes of interests of what the accepted ones for the ones of the pessimistic type. When the tax of interests increases is probable that only wing optimists accept to remain in the market what in last instance can mean increase of the risk for the banks, therefore will be in the market only the individuals with proposals of raised credit risk.