Credit Scores and Reports

5 traits that go along with a lower credit score


Paying your bills on time may help you achieve a high credit score, but studies say there are unexpected traits that correlate to your score as well

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You know how important good credit is, so you watch your credit-related activity closely. You limit credit inquiries, maintain a respectable debt-to-income ratio and — of course — pay the bills on time.

But know this: The credit industry is watching right back. If you’ve checked your credit report, you can see it tracks your individual behavior, but did you know it tracks how we behave in groups? In search of ways to identify the most creditworthy customers, the industry and academics have studied where we live, who we are, how we behave — and how these traits relate to credit scores.

So, the studies say, a pack-a-day smoker from Harlingen, Texas, is likely to have a worse credit score than a very patient woman from Wausau, Wis.

Hold the e-mails, though — these unexpected traits that go along with lower credit scores are just correlations, not causations. It’s not cause and effect. “None of these things are factored into your score, but have been studied alongside credit scores,” explains Michele Raneri, vice president of analytics for Experian.

Keep reading to learn about five things that tend to go along with a lower credit score.

5 traits that may signal a lower credit score

Do men in the South have lower scores than women in Wisconsin?

By Jodi Helmer

You maintain a respectable debt to income ratio, pay the bills on time and limit the number of credit inquiries on your file — all in the hopes of earning a good credit score. While conscientiousness is related to good credit, offbeat studies have linked traits such as gender, impatience and location to credit scores.

“None of these things are factored into your score but have been studied alongside credit scores,” explains Michele Raneri, vice president of analytics for Experian.

Keep reading to learn which 5 traits may indicate why you have a low credit score.

You Live in the South

Residents of Harlingen, Texas have the lowest average credit scores in the nation.

In 2011, the average score for Harlingen residents was 686, according to the State of Credit survey conducted by Experian.

Of the top 10 cities with the lowest credit scores, eight were in the South, including Jackson, Mississippi and Augusta, Georgia. Four of the cities with the lowest credit scores were in Texas: Harlingen, Corpus Christi, Tyler and El Paso.

“The biggest problem in the South is delinquency of payments,” says Raneri. “It seems to be the common thread in the Southern cities that had the lowest credit scores.”

On the other end of the spectrum, eight of the 10 cities with the highest credit scores were in the Midwest, including Wausau, Wisconsin, where the average credit score was 789.

* These numbers are based on the Experian VantageScore system where credit scores ranging from 501 to 990; traditional FICO scores range from 350 to 850.

You’re Impatient

The old clich\xe9, “patience is a virtue” has taken on new meaning thanks to research published in The Journal of the Association for Psychological Science. Impatient people tend to have lower credit scores than those who are patient.

Stephan Meier, associate professor at Columbia Business School and co-author of the study, notes that several factors may contribute to a poor track record for repaying debt, including medical emergencies and unemployment, but that impatience does play an important role.

“Not paying [bills] on time or not paying back debt at all has immediate benefits — more money for consumption now — and has costs in the future: Lower score, higher cost for debt, and so on,” he says.

Impatience leads to a desire for instant gratification and poor planning, which can sap your bank account — making it impossible to repay debt — or lead you to forget to pay your bills until the due date has passed.

Understanding the problem and its impact on your credit score, however, could lead you out of the woods because, “You’ll recognize your impatience and implement strategies to try to avoid it,” Meier says.

You’re a Child of the 80s (or 90s)

Your generation might decide your credit score.

Generation Y, which includes those aged 19 to 29, had the lowest credit rating, with an average score of 672, according to Generation Gap, a 2012 report released by Experian.

With an average score of 829, members of Greatest Generation, which includes those over 66, had the highest credit scores. (The average scores for Baby Boomers and Generation X were 782 and 718, respectively.)

Raneri attributes the differences in credit scores to the fact that Generation Y is just starting to establish credit — so their scores are impacted by lower available credit, higher credit utilization and shorter credit histories.

“Younger people may make a mistake like not paying their bills on time,” Raneri says. “When you get older, you learn to use credit better and your score goes up.”

You Smoke

Your pack-a-day habit could be sending your credit score up in smoke. Researchers at the University of Minnesota found that smoking can have a significant impact on your credit score, accounting for up to 30 points of a FICO score.

“Smokers are less able to control their impulses, and that impacts their economic decision-making,” explains Aldo Rustichini, Ph.D., professor of economics at the University of Minnesota.

Smoking is also a risk-taking behavior, according to Rustichini. And risk takers have lower credit scores than their risk-averse counterparts.

The good news: It might be possible to reverse the impact.

“If you’re able to successfully quit smoking — for good, not just for a few weeks — it shows self control and willpower and that may also reveal itself in your credit score,” he says.

You’re a Man

In the battle of the sexes, women appear to come out on top — at least when it comes to credit scores.

There appears to be a gender difference when it comes to managing credit. The Experian National Score Index found that the average credit score for women is 682 — seven points higher than the average score of 675 for men.

The research points to potential explanations for gender differences in credit scores: Women have more open credit accounts than men, while men have more debt than women (the average debt for men was $12,953 compared with $11,486 for women).

Raneri does note that, “Gender, race, age and occupation are not part of the equation,” in determining credit scores, despite misconceptions to the contrary — including a poll by Visa Inc. which found that 17 percent of Americans believed gender had an impact on them.

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