Research by the Money Education Foundation has highlighted how your financial health could be affecting your mental and physical well-being.
In an age where financial metrics like credit scores dictate much of our economic interactions, a new dimension has emerged concerning their impact on our health. A recent study delves into how a seemingly numerical assessment of one's creditworthiness can profoundly influence not just financial opportunities but also mental and physical health.
Understanding Credit Scores
A credit score, ranging from 300 to 950, serves as a pivotal indicator of an individual's creditworthiness. Here's how it breaks down:
- Payment History (35%): Reflects the timeliness of debt repayments.
- Credit Utilisation (30%): How much of your credit limit you're using.
- Length of Credit History (15%): The age of your credit accounts.
- Types of Credit Used (10%): Variety in credit accounts like mortgages, credit cards, etc.
- New Credit (10%): Recent credit applications can lower your score due to perceived risk and your need for further credit.
A high score can unlock doors to better loan terms and financial products, whereas a low score might shut them, often leading to higher borrowing costs or outright denials.
More Than Just Financial Checks
Contrary to common belief, where 80% of participants in our poll thought credit checks were only for mortgage applications, credit scores play a broader role:
- Utility and WiFi Services: Providers assess credit to gauge payment reliability, potentially denying services or offering them at higher rates to those with lower scores.
- Housing: Landlords are increasingly using credit scores to screen tenants, affecting one's ability to secure a home.
- Basic Banking: Some banks even scrutinise credit when considering new account openings, impacting access to fundamental financial services.
- This expansion of credit checks into everyday life can lead to exclusion from essential services, exacerbating financial strain.
The Health Connection
The correlation between credit scores and health is startling:
From a sample of 300 people, those with high credit scores (150 individuals) predominantly reported no major health issues, with 143 specifically stating they were free from mental or physical ailments.
Conversely, among the 150 with poor credit scores, 147 reported health problems, with all of them admitting to feeling anxious or suffering from anxiety.
This suggests that the stress of managing or having a poor credit score might not only affect one's financial life but also their mental and physical health. Terms like 'thin file'—where someone has little to no credit history—also pose similar challenges, often leading to the same hurdles as having a bad credit score.
Looking Forward
Recognising this link, we're set to initiate the largest study to date to explore this correlation comprehensively. The goal is to advocate for a more nuanced understanding of credit scores, potentially leading to policy reforms that consider the broader implications on human well-being.
As we navigate through a world increasingly dependent on digital and financial metrics, understanding the extensive impact of credit scores is crucial. It's not just about financial capability but also about maintaining the health and dignity of individuals. This revelation calls for a re-evaluation of how we define and use creditworthiness in society.
