The latest study examines how financial health is connected to the details in and interactions with credit reports.

On September 17, 2019, the Consumer Financial Protection Bureau (CFPB) unveiled an Innovation Insight report detailing a groundbreaking study on the link between subjective financial well-being and objective aspects of credit reports, along with consumer interaction with financial data through educational platforms. Titled “Credit Characteristics, Credit Engagement Tools, and Financial Well-Being,” this research, conducted in partnership with Credit Karma, a tech company specializing in personal finance that offers free credit scores, reports, and educational resources, marks the first investigation into how financial well-being correlates with engagement with financial information, drawing from a consumer survey aligned with actual data on their interaction.

Expanding on the CFPB’s prior inquiries into financial well-being, the research utilizes the Financial Well-Being (FWB) Scale developed by the Bureau to gauge consumers’ subjective financial status, connecting these FWB scores to objective indicators of financial health, particularly characteristics of consumers’ credit reports. It further examines the relationship between consumers’ financial well-being and their interaction with financial educational tools, such as credit score simulators, credit factor information, and informational emails.

The study analyzed responses from a voluntary survey conducted by Credit Karma among its members in late 2017, featuring the Bureau’s comprehensive 10-question FWB Scale, yielding nearly 3,000 anonymous records linking respondents’ FWB scores with their demographic, credit report, and website engagement data. Key findings suggest:

  • A strong positive correlation (0.44) between a consumer’s credit score and their FWB score, indicating that individuals with higher credit scores typically exhibit higher FWB scores.
  • A positive correlation between age and FWB score diminishes when controlling for credit score.
  • The research identifies seven credit report factors and three engagement metrics significantly associated with FWB scores.

Credit Report Factors — Attributes such as credit card limits, possession of a credit card, and recent account openings with balances positively influence FWB scores, while credit card utilization, number of revolving accounts, recent collections, and student loans have a negative impact.

Engagement Metrics — Positive engagement indicators include frequent use of the credit simulator and review of credit factors on Credit Karma, whereas a negative correlation was found with the opening of Credit Karma emails over the past sixty days, typically linked to credit monitoring alerts.

These correlations may shed light on the causative factors behind FWB score variations, suggest that changes in FWB scores influence related factors, or point to other unexamined variables like planning propensity. Regardless, these findings pave the way for further exploration into these dynamics as the CFPB strategizes to enhance financial literacy through the lens of financial well-being.

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