Did You Score?

Topic: Pearls of Wisdom

Fergus W. Gould CFA

March 4, 2016

Image used with permission: iStock/Marvid


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Did You Score?

It turns out that credit scores are not just useful for banks to evaluate if you are a credit-worthy borrower.

According to a recent paper by the U.S. Federal Reserve, credit scores can predict the stability and longevity of a romantic relationship.1

By studying couples after they started to live together, the researchers reached a number of conclusions:

  • People tend to form relationships with others that have similar credit scores.
  • People with higher credit scores are more likely to remain in a committed relationship.
  • Couples with a credit score mismatch are more likely to come apart for non-financial reasons than “matched” couples.
  • Credit scores are indicative of trustworthiness in general.

To illustrate, the authors found that, controlling for other factors and limiting their analysis to couples who stayed together for at least one year, individuals with above-average credit scores are 14% more likely to enter into a committed relationship over the next year than those with average scores. For couples whose relationship survives the first two years, a better-than-average credit score results in “a 37% lower chance of separation in the third and fourth year”, compared to couples with average scores. The authors reason that higher credit score couples become more financially intertwined, such as taking on a joint mortgage, and may then expend more effort in making the relationship work. Talk about financial handcuffs! A mismatch in credit scores can be a recipe for marital discord – both related to their finances and, apparently, even when the couple’s finances are not the cause of the breakup. The authors think that “credit scores matter because they reveal information about general trustworthiness.” Expanding on this, UBC economics professor Marina Adshade, author of Dollars and Sex, states that, “There’s a whole host of [behavioural] characteristics consistent with having a good or bad credit score”, including organisational skills and a general concern for the future.

Why, might you ask, would the Fed even think of researching this? Well, consumer spending makes up over 70% of economic GDP in the U.S. New household formation is instrumental in creating better economic and financial opportunities for the couple longer term and has direct implications for real estate pricing, construction, renovations and outfitting a home, all of which help GDP growth.

So… now you know!  There are at least a couple of take-aways from this:

  • If you are single, in a bar, and someone asks you for your credit score, there’s a good chance that they like you.
  • If you are past the dating scene and, like many of our clients, have children, whenever your son or daughter brings a romantic partner over to dinner for the first time, forget the chit-chat about the weather, their family and other niceties – just drill them on their credit history!

1.Credit Scores and Committed Relationships, Jane Dokko, Geng Li and Jessica Hayes, August 2015. Much of this article is based on a summary of the paper in Bloomberg Businessweek, October 12, 2015.

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