Do you require yet more excuses to be obsessed with your credit score? Here’s a fresh (though gruesome) take on the theme: An economic research team has discovered 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’ll live.
Recent research conducted by researchers from the University of California Irvine and the University of Geneva looked at Experian credit data from 2004 to 2016 for more than 2 million randomly selected persons.
Each time a person died during that time period, Experian was notified of their death, which allowed the researchers to develop a computer algorithm that could determine whether certain elements of their credit report — such as a sudden, significant change in credit score — were associated with mortality.
According to the conclusions of the experts, which were published in a report in December 2021, it very certainly was.
In the loan market, “people react in different ways depending on unique underlying qualities,” explains Giacomo De Giorgi, a professor at Switzerland’s Geneva School of Economics and Management and one of the study’s authors. “In this particular instance, the possibility of death is one of those.”
What is the relationship between credit ratings and death?
In the researchers’ opinion, there are two key ways in which the relationship between mortality and credit ratings expresses itself.
The first is in the manner in which people spend their money throughout their lives – particularly at the conclusion of their lives. Someone who has recently been diagnosed with cancer, for example, will most likely spend in a significantly different manner than he did just a few months prior.
It is possible that he will accrue medical debt or, if the diagnosis is terminal, that he will max up his credit cards on Mediterranean cruises, BASE-jumping equipment, or some other expensive, once-in-a-lifetime purchase.
The second link is a little more complicated.
Individuals who encounter economic constraints, such as sudden job losses, are more likely to incur debt, lose access to healthcare resources, and experience mental health crises as compared to those who are gainfully employed, according to a previous study.
All of these result in financial hardship, which has the potential to decrease a person’s lifespan in the long run. According to the experts, this is reflected in credit data as well.
The fact that you have a low credit score does not indicate that you are more likely to die early, according to this statistic. Note that the article only looks at significant changes in credit reports; it does not compare individual credit ratings.)
Furthermore, because the poorest of America’s citizens do not have access to credit, they are not represented in the data.
Additionally, these new findings cannot be forecast when you will die based on a precise numerical change in your credit score — in other words, the 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 such dips and connect them with a person or organization that may stage a life-changing intervention.
Let’s go back to our fictional cancer patient from before. Assume he survives the disease but is forced to take unpaid leave from his job in order to recuperate from it.
Bills continue to build up in the interim, and he is forced to apply for a new credit card and spend the entire limit in order to keep afloat. As a result, his credit score suffers a severe decline, which continues to decline due to the expensive expense of chemotherapy and rehabilitation.
Researchers suggest that in such cases, the data may be used to help companies build 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 Department of Economics professor at the University of California Irvine and a member of the study’s research team, “many people don’t often understand the risk that they’re getting themselves into through various forms of borrowing and how that all leads to increasingly catastrophic outcomes for them.”
“People’s lives could potentially be improved if they had some advanced information on [these] issues,” says 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 how healthy you are based on your credit score, then insurance companies can as well, according to the researchers.
The use of Big Data to raise rates in an industry that already has a bad reputation for doing so might make items like health care and life insurance even more expensive than they are. It is also possible that employers could make use of this information to discriminate against their employees in the future.
In his words, “there is great power in leveraging data to forecast events that would otherwise be unreachable.” “However, there are certain potential ways in which some businesses would seek to take advantage of it,” says the author.