New CFPB report explores relationship between financial well-being and credit reports

cfpb-logoThe CFPB released a new report and study that explores the relationship between subjective financial well-being and objective credit report characteristics and consumers’ engagement with financial information through educational tools.

“Credit Characteristics, Credit Engagement Tools, and Financial Well-Being” presents the findings of a joint research study between the bureau and Credit Karma, a personal finance technology company providing free credit scores, reports and credit-related educational tools. The two organizations say this report is the first to study the relationship between financial well-being and engagement with financial information based on a survey of consumers matched with actual data on engagement.

The report analyzes data from a voluntary survey that Credit Karma conducted among some of its members in the fall of 2017. The survey, which consisted of the full 10-question version of the bureau’s financial well-being scale, or FWB, resulted in close to 3,000 de-identified observations on respondents’ FWB score matched with background, credit report, and website usage data, as well as engagement metrics.

The report’s main findings include the following:

  • A consumer’s credit score is very strongly positively connected to the FWB score, as indicated by a correlation coefficient of 0.44, meaning that people with higher credit scores also tend to have higher FWB scores.
  • There seems to be a positive relationship between age and the FWB score, but after accounting for credit score the relationship all but disappears.
  • In addition to credit score and age, the study identifies seven credit report variables and three engagement variables that are strongly related to a consumer’s FWB score.

The observed relationships might explain the true causes of changes in the FWB score; they might mean that changes in the FWB score lead to changes in the related factor; or they might be better explained by unconsidered factors such as the propensity to plan.

The CFPB plans to further study the relationships as it attempts to develop its strategy for improving financial capability using the concept of financial well-being.

To learn more, visit the CFPB’s website.

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