Locus of Control and Your Credit Rating

A study published in The Journal of Behavioral Science in 2008 took a look at the effect of an individual’s personality on their credit rating.  Vanessa Gail Perry (2008) Giving Credit Where Credit is Due: The Psychology of Credit Ratings, Journal of Behavioral Finance, 9:1, 15-21, DOI: 10.1080/15427560801896784.

The study found that one of the key factors in having a good credit rating was something called “locus of control.”

In short, locus of control is the extent to which individuals attribute important outcomes to external forces which are outside of their control. The study controlled for income, education and the incidence of negative “life events.”

The conclusion? Consumers with a higher level of financial knowledge and a locus of control that attributed outcomes to their own behavior rather than external events had higher credit scores than consumers with a lower level of knowledge and a locus of control that attributed outcomes in their lives to outside forces.

The study also found that the extent to which financial knowledge affects credit scores is dependent upon whether an individual has an external locus of control or an external locus of control.

 When we have conversations with new customers, we see that it is sometimes difficult for some who are faced with credit “challenges” to confront that fact.

Many of these people have had their credit damaged by tragic life events:  divorce, loss of employment, medical crises…all these events can and do negatively impact peoples’ credit. It is not pleasant to go back and visit those dark times. For many of these folks, the decision to confront their credit is a very emotional one.

Part of our company’s credit repair process is to help you put these situations behind you, but we also strive to help educate our clients about how their own internal behavior may have caused or contributed to the damage.

We strive to help you put your credit challenges in your “rear view mirror”, but we also educate you so that you control your scores into the future.

Give us a call today and let us help get you moving forward on the road to credit restoration and financial success.