Impatience Can Sink Your Credit Score, Study Finds


New York (MainStreet) – A new report in the Journal of Psychological Science suggests that people who don’t exactly have the patience of a saint tend to make bad financial decisions – and have low credit scores as a result.

That’s not good news for people who are quick on the trigger emotionally, since lower credit scores usually translate into higher costs for things like home and auto loans.

The report’s authors, Columbia University Professor Stephan Meier and Stanford University Professor Charles D. Sprenger, say it’s because impatient people are conditioned to demand immediate gratification. The two academics surveyed 437 consumers and asked them if they would prefer an immediate cash payment or wait for a larger cash payout some time down the line.

“The most extreme choice was $22 now or $50 in a month,” Meier said. “There were a surprising amount of people taking the $22.”

The survey respondents who said they would wait for the larger payment tended to have higher credit scores than those who wanted the smaller amount of cash right now. The score differential was significant: 30 points, on average, separated the two groups.

Meier said that consumers with less patience correlate with consumers who don't to pay their bills. Sure, the immediate impact of that decision is more money in your pocket, but the long-term impact is a major ding on your credit report for paying the bill late.

“Conceptually, it does make sense that how people discount the future, i.e. how impatient they are, affects their decision to default on their loans,” Meier explained. “Individuals accumulate debt and then have to decide whether to repay the money or use the money for something else.”

That translates into a short-term versus long-term proposition – a scenario that doesn’t work out well financially if you’re into immediate gratification.

Another recent study by research teams at Louisiana State University, Texas Tech University and Northern Illinois University also ties personality to credit score, reporting that disagreeable individuals actually had higher credit scores than agreeable people.

“With regards to personality and credit – it makes sense that conscientiousness is related to good credit, but what was really interesting was that agreeableness was negatively related to your credit score,” said Jeremy Bernerth, a professor in LSU’s E. J. Ourso College of Business Rucks Department of Management, in a statement. “That suggests easygoing individuals actually have worse credit scores than disagreeable and rude individuals. This suggests that agreeable individuals might get themselves in trouble by co-signing loans for friends or family or taking out additional credit cards at the suggestion of store clerks.”

If you're looking to start off 2012 on the right financial footing, check out MainStreet's Year-End Credit Checklist and get your score in order!

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