The relationship between subjective financial well-being and objective credit report characteristics and consumers’ engagement with financial information through educational tools is highlighted in a report issued by the federal consumer financial protection agency Tuesday.
In what the Consumer Financial Protection Bureau (CFPB) called a “first-of-its-kind” study, the agency said it presents the findings of a joint research study between the CFPB and Credit Karma, a personal finance technology company providing free credit scores and reports and credit-related educational tools. The agency asserted that the report is the first to study the relationship between financial well-being and engagement with financial information based on a survey of consumers matched with actual data on engagement.
The study, CFPB said, uses the bureau’s Financial Well-Being (FWB) Scale to measure consumers’ subjective financial well-being. The study, CFPB said, 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, including access to a credit score simulation tool, information about credit factors, and emails with information and suggestions,” the bureau said in a blog post.
The bureau said the report analyzes data that Credit Karma conducted among its members two years ago. The main findings of the report, CFPB said, include:
- A consumer’s credit score is very strongly positively connected to the FWB score, as indicated by a correlation coefficient of 0.44, meaning that people with higher credit scores also tend to have higher FWB scores.
- There seems to be a positive relationship between age and the FWB score, but after accounting for credit score the relationship all but disappears.
- 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.
New report explores the relationship between Financial Well-Being and the contents of and engagement with credit reports