Credit Knowledge is Power – Info Risk Manage

This is a guest post from Rourke O’Brien, Assistant Professor of Public Affairs at the University of Wisconsin-Madison. 

Does regular consumer access to their FICO® Score influence financial knowledge and behavior?

Professors Abigail Sussman, Tatiana Homonoff and I recently completed a multi-year research study with 400,000 Sallie Mae customers.  Using a randomized control trial research design, we studied whether student loan borrowers who check their credit scores regularly make better financial decisions and manage finances more responsibly. The answer? An emphatic YES.

Kelly Christiano, SVP at Sallie Mae and I had the opportunity to present the findings at this year’s FICO World. Sallie Mae was the first national private education lender to offer free access to quarterly FICO Scores through the FICO^®Score Open Access program.

Our research found that after one year, student loan borrowers who logged on to view their FICO Score had fewer past due accounts and took steps to establish a credit history. These positive behaviors ultimately translated into higher FICO Scores for borrowers.

For students who want to improve financial health, it is important to be aware of the terms of opening new accounts (only open new lines of credit when needed) and to make sure that payments are on time. Moreover this research suggests that all consumers, not only student loan borrowers, should regularly check their FICO Score to be thoughtful and empowered about how their credit behavior impacts their long-term financial health.

You can also review the full research details here “Does Knowing Your FICO Score Change Financial Behavior? Evidence from a Field Experiment with Student Loan Borrowers”