Do you need more excuses to obsess over your credit score? Here’s a novel (albeit awful) take on the theme: An economic research team has found that your three-digit credit score is not only a solid measure of your financial stability as a borrower, but can also predict how long you will live.
Recent research by researchers at the University of California, Irvine and the University of Geneva looked at Experian credit data from 2004 to 2016 for over 2 million randomly selected people.
Each time a person died during this period, Experian was informed of their death, which enabled the researchers to develop a computer algorithm capable of determining whether certain elements of their credit file, such as a change sudden and significant credit score, were associated. with mortality.
According to the experts’ findings, which were published in a report in December 2021, this was most certainly the case.
In the loan market, “people react in different ways depending on unique underlying qualities,” says Giacomo De Giorgi, professor at the Geneva University of Economics and Management and one of the authors of the study. “In this particular case, the possibility of death is part of it.”
What is the relationship between credit scores and death?
According to the researchers, the relationship between mortality and credit scores is expressed in two main ways.
The first concerns how people spend their money throughout their lives – especially at the end of their life. Someone who has recently been diagnosed with cancer, for example, will most likely spend in a very different way than they did a few months ago.
He may run up medical debt or, if the diagnosis is terminal, top up his credit cards on Mediterranean cruises, BASE-jumping gear, or other one-time expensive purchases.
The second link is a bit more complicated.
According to a previous study, people facing economic hardship, such as sudden job losses, are more likely to run into debt, lose access to health resources, and experience mental health crises than those who are gainfully employed.
All of these factors lead to financial hardship, which can reduce a person’s life expectancy in the long run. According to experts, this is also reflected in credit data.
The fact that you have a low credit score does not indicate that you are more likely to die prematurely, according to this statistic. Note that the article only covers material changes in credit reports; it does not compare individual credit scores.)
Also, because the poorest US citizens do not have access to credit, they are not represented in the data.
Moreover, these new findings cannot be predicted when you die based on a precise numerical change in your credit score – in other words, researchers cannot conclude that a 40 point reduction in your credit score indicates that death is approaching.
It is possible to use this data to identify these declines and connect them to a person or organization who can organize a life-changing intervention.
Let’s go back to our fictional cancer patient from before. Suppose he survives the illness but is forced to take unpaid leave from work to recover.
The bills keep piling up in the meantime, and he’s forced to apply for a new credit card and spend the entire limit in order to stay afloat. As a result, his credit rating suffers a severe decline, which continues to decline due to expensive chemotherapy and rehabilitation expenses.
The researchers suggest that in such cases, the data can be used to help companies create services that identify our hypothetical patient as a candidate for targeted financial assistance or government-sponsored health insurance programs such as Medicaid.
According to co-author Matthew Harding, a professor in the Department of Economics at the University of California, Irvine and a member of the study’s research team, “many people often don’t understand the risk they are putting themselves in through various forms of borrowing”. and how it all leads to increasingly catastrophic results for them.
“People’s lives could potentially be improved if they had advanced information about [these] questions”, explains the author.
According to Harding, there is another, more dystopian interpretation to be drawn from this data.
If a group of economics professors can predict your health based on your credit score, so can insurance companies, researchers say.
Using big data to raise rates in an industry that already has a bad reputation for doing so could make things like health care and life insurance even more expensive than they are. It is also possible that employers will use this information to discriminate against their employees in the future.
In his words, “there is great power in leveraging data to predict events that would otherwise be unreachable.” “However, there are some potential ways that some companies would seek to take advantage of this,” the author explains.