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Anatomy of the Credit Score

Author

Listed:
  • Arya, Shweta
  • Eckel, Catherine
  • Colin, Wichman

Abstract

This paper addresses the question of what determines a poor credit score. We compare estimated credit scores with measures of impulsivity, time preference, risk attitude and trustworthiness, in an effort to determine the preferences that underlie credit behavior. Data are collected using an incentivized decision making lab experiment, together with financial and psychological surveys. Credit scores are estimated using an online FICO credit score estimator based on survey data supplied by the participants. Preferences are assessed using a survey measure of impulsivity, with experimental measures of time and risk preferences, as well as trustworthiness. Controlling for income differences, we find that the credit score is correlated with measures of impulsivity, time preference, and trustworthiness.

Suggested Citation

  • Arya, Shweta & Eckel, Catherine & Colin, Wichman, 2011. "Anatomy of the Credit Score," MPRA Paper 47783, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:47783
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    References listed on IDEAS

    as
    1. Catherine C. Eckel & Cathleen Johnson & Claude Montmarquette & Christian Rojas, 2007. "Debt Aversion and the Demand for Loans for Postsecondary Education," Public Finance Review, , vol. 35(2), pages 233-262, March.
    2. repec:pri:rpdevs:gamespaper.pdf is not listed on IDEAS
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    Cited by:

    1. Alexandra Brown & J. Michael Collins & Maximilian D. Schmeiser & Carly Urban, 2014. "State Mandated Financial Education and the Credit Behavior of Young Adults," Finance and Economics Discussion Series 2014-68, Board of Governors of the Federal Reserve System (U.S.).
    2. Urban, Carly & Schmeiser, Maximilian & Collins, J. Michael & Brown, Alexandra, 2020. "The effects of high school personal financial education policies on financial behavior," Economics of Education Review, Elsevier, vol. 78(C).

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    More about this item

    Keywords

    credit score; time preference; risk attitude; trust; impulsivity;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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