Report examines financial status, credit report relationship

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The Consumer Financial Protection Bureau’s (CFPB) recently released Innovation Insight report offers a look into the relationship between subjective financial well-being and objective credit report characteristics.

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Credit Characteristics, Credit Engagement Tools, and Financial Well-Being also explores consumers’ engagement with financial information through educational tools. The report presents joint research study findings between CFPB and Credit Karma, a personal finance technology company providing free credit scores and reports and credit-related educational tools.

The work involved using the Financial Well-Being (FWB) Scale created by CFPB to measure consumers’ subjective financial well-being and relates the derived FWB score to objective measures of consumers’ financial health, specifically, consumers’ credit report characteristics. The study also seeks to relate consumers’ subjective financial well-being to consumers’ engagement with financial information through educational tools, information about credit factors, and emails with information and suggestions.

The 10-question survey consisted of CFPB’s FWB Scale, resulting 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 effort determined a consumer’s credit score is very strongly positively connected to the FWB score; there seems to be a positive relationship between age and the FWB score, but after accounting for credit score the link all but disappears; and 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.

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