Does Impatience Signal a Lower Credit Score?
Tuesday, December 20th, 2011
The answer is yes according to a recent study, Time Discounting Predicts Creditworthiness. 471 subjects were tasked with deciding if they wanted a smaller immediate payment or a larger payment farther in the future. Subjects willing to wait for larger payments further in the future have credit or FICO scores that were on average 30 points higher than their less patient counter parts.
Your FICO score predicts how likely you are to pay a credit card bill, car loan, mortgage or repay any money your borrow. This means how impatient we are shapes how we discount or value the future which in turn helps to determine how likely we are to default on a loan obligation.
While a 30 point difference (on average) is not a blow-out it is significant enough to change a credit decision.
This study helps emphasize the importance of understanding the psychology of impatience when we are designing financial, health and other future-discounted products and services.
