Broadly speaking, our results point to a quantitatively large and significant role for credit scores in the formation and dissolution of committed relationships. Three sets of empirical results support this conclusion: First, credit scores are positively correlated with the likelihood of forming a committed relationship and its subsequent stability. Second, partners positively sort into committed relationships along the credit score dimension even after controlling for other similarities between the partners. Third, a positive correlation notwithstanding, within-couple differences in credit scores are apparent at the start of relationships. Notably, the initial match quality in credit scores is highly predictive of subsequent separations even when controlling for other factors, such as couples’ use of credit and the occurrence of financial distress.
Jane Dokko, Geng Li, and Jessica Hayes write,
These results lead us to hypothesize that credit scores, in addition to measuring an individual’s creditworthiness regarding the repayment of debt obligations, reveal information about an important relationship skill. We argue that one such skill could be an individual’s general trustworthiness and commitment to non-debt obligations. To make this argument, we turn to survey-based measures of trustworthiness to show that the average credit score of a geographic area (typically a county) is highly correlated with the same area’s average level of trustworthiness. We also find that when individuals have a long exposure to greater trustworthiness, as measured by surveys, they tend to have higher credit scores even years after they leave those areas. Similar to how credit scores predict the formation and dissolution of committed relationships, we find that survey-based measures of trustworthiness also have predictive power for these outcomes. Interestingly, such statistical relevance diminishes when the couples’ credit score levels are controlled for, underscoring the overlapping between credit scores and survey-based measures of trustworthiness.
Pointer from Tyler Cowen.
In mortgage underwriting, they used to talk about the three C’s: collateral (the house, particularly the borrower’s equity in it), capacity (the borrower’s income relative to mortgage payments and other debt obligations), and credit history.
In fact, I think that the third C should be called conscientiousness, one of the Big Five personality traits. The authors of the paper instead use the term trustworthiness. That this trait should matter for relationship stability, and that it is well measured by credit scores, should surprise no one.
I worry that pursuit of this line of inquiry, like research on the role of IQ, will not be good for the career of a young researcher.
I made up an acronym “CUTS” – “Complementary Uncorrelated Traits and Skills”. Complementary with IQ in terms of producing higher chances of success and better life outcomes, but with a good amount of variance at any particular level of smarts. Conscientiousness is one of the CUTS.
The idea is that in a factor-analysis for some life-outcomes metric in the contemporary world, the best one-variable model would be based on IQ, with a sizable but not too-bad error margin in terms of making predictions. But the best two-variable model would be IQ+CUTS, and I think the error margin would be pretty small.
A lot of educational effort is focused on attempts to boost the IQ component of the two-variable factor-analysis model. So far, I think the data points strongly to the null hypothesis or very marginal / diminishing returns after the most basic levels of instruction. Like Gibbon said, “But the power of instruction is seldom of much efficacy, except in those happy dispositions where it is almost superfluous.”
But very little educational effort is focused on attempts to boost the CUTS. It looks like we are currently just throwing kids at the system and selecting those who naturally (or with a lot of parental pressure) exhibit these traits, giving all the others the rope they need to hang themselves. I think we could do a lot better on that score.
It may turn out that research on this matter will also support the null hypothesis, but I suspect that there is more room for improvement on this score – relative to IQ – in terms of what they used to call ‘character development’, and I think a lot historical narrative supports this hunch.
Maybe the next big education fad will be focused on boosting the CUTS part of the equation. But I suspect we’ll have to reinvent the wheel on how public schools will actually have to go about trying to do this, since a lot of the historical inheritance of traditions of developing these aspects of character was abandoned in the last few generations.
I like this comment a lot……very insightful.
I agree with Arnold that the political climate around education is most definitely going to throw sand in the gears towards making real progress. You’ll have a lot of axe grinding around particular battle points but little experimentation with ideas that could disrupt the status quo.
I often wonder if the world will evolve back towards a boarding school model where boys and girls learn separately with very strict rules put in place with the idea of “building character.” I’m not sure I like it, but I think it’d be more beneficial to the median student than what you get now.
See also David Brooks’ recent article on ‘boosting the CUTS’ at university, and consistent with his new book The Road To Character.
And to the main point of the article…….I agree that the results should not be surprising. A credit score is a good proxy for your trustworthiness and impulse control which is very important in committed relationships.
It’d be interesting if there were more empirical research on the causal factors behind the relationship between your financial situation and impulsive behavior.
I’d be shocked if a decent portion of it wasn’t genetic, but I’d be interested to know if the effect is self-reinforcing independent of innate personality traits.
I’d also be shocked if that weren’t the case to some degree.
Let’s no go all in on the fundamental attribution error here. Yes, there’s probably a significant innate component, but it’s also surely true that relationships tend to fall apart under financial pressures. Would it surprise anyone if, say, the divorce rate rose markedly among ex-autoworkers after a plant closure (even though, obviously, their genetic predisposition to conscientiousness had not changed)?
Small data point:
My sister is a young woman who’s dating an older man who’s financially well off.
She herself is a bit of a young stallion who’s never had the ability to maintain long-term romantic relationships. Her credit isn’t very good.
She’s been with him 5 years (with him providing the money for everything), and during this time I’ve seen her ease into a more relaxed lifestyle where she doesn’t drink or party as much.
Part of it probably just natural maturation, but I’m pretty sure having a $100,000/year financial cushion helped smooth over the rough spots quite a bit.
When I saw Tyler’s post, I immediately thought “conscientiousness.” Some time in the 90s, insurance companies started using credit information to price auto and homeowner’s policies, because it is *extremely* predictive of loss experience. The very best credit individuals are something like 1/2 to 1/3 as likely to have a claim in a given year as the worst credit individuals. Insurer’s don’t actually care *why* credit is predictive of losses. All we care about is appropriately segmenting the risks on our books; these sticky questions of why and how Variable X predicts loss experience don’t really concern us. But a leading suspicion is that credit is measuring the degree to which people are irresponsible, inattentive, easily distracted, present-minded…basically it is a proxy for conscientiousness. If I were a social scientists trying to measure the effects of conscientiousness on some dependent variable, I’d definitely append credit to my data.
(Risky Business, a book to which Arnold contributed, has a chapter on the use of credit to price insurance.)