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Patience = better credit score?

By Janna Herron ·
Thursday, January 12, 2012
Posted: 4 pm ET

Remember that ketchup commercial from at least two decades ago: "Good things come to those who wait?"

It might as well be, "Good credit scores come to those who wait," after a new study shows consumers who exhibit more patience tend to have better credit scores.

The research comes from the Boston Federal Reserve's Center for Behavioral Economics and Decisionmaking and is scheduled to appear in an upcoming issue of Psychological Science, according to the journal's press release.

Researchers tested 437 low- to moderate-income people at a Boston community center that offers tax-preparation help. Each was given a questionnaire asking if they would prefer a smaller, immediate reward or a larger reward in the future.

The participants also allowed researchers to pull their FICO credit scores, so researchers could compare the scores of those accepted the short-term award versus the longer-term one. Surprise! The consumers who preferred to delay the bonus had credit scores about 30 points higher than those who couldn't wait for the future reward.

Even more interesting, the scores of the impatient participants fell below 620, or the conventional cutoff point for subprime lenders, according to Chuck Jaffe, who reported on the study for MarketWatch.

The leader of the study, Stephan Meier, a professor at Columbia's Business School, theorized that the impatient consumers would rather delay paying their bills in order to have extra money now. Meier also didn't discount other external factors such as job loss, divorce or medical expenses.

I also wonder if part of the problem isn't just paying the bills, but getting in too deep with your debt -- a front-end and back-end problem.

For example, if I'm an impatient person and really want to buy a new flat-screen TV, I'm probably more likely to pull the trigger and put the purchase on my credit card even though I can't really afford it. And if I repeat this scenario with different credit cards, I may not have enough money to pay my bills (or even the minimum) come payday time.

Compare that with a person who saves up over several months, so they can buy the TV and pay off the balance in full, while avoiding other purchases.

What this study really underscores -- and this is nothing new -- is to have a good credit score means having responsible, thought-out financial habits. That includes budgeting to live within your means and always paying your bills on time.

What's your take on the study?

Follow me on Twitter: @JannaHerron

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