Credit Scores, Cognitive Aging & Competency: Older Adults’ Financial Decision-Making

Older adults face a number of major financial challenges and decisions as they age, including living on a fixed income, ensuring that their savings will last their remaining years, and estate planning . In light of such major decisions, the potential negative impact of cognitive changes associated with age becomes an important concern. In particular, older adults exhibit well-documented declines in what is known as fluid intelligence, or the speed and capacity for generating, transforming, and manipulating information. However, older adults may have an advantage in terms of their crystallized intelligence, or the knowledge, experience, and expertise accumulated over a lifetime. In order to examine the relative influence of fluid and crystallized intelligence on older adults’ financial decision-making, researchers have examined how each type of intelligence impacted older adults’ credit scores and other measures of decision-making quality.

Fluid intelligence is a general capability that remains relatively constant regardless of what information is being processed or manipulated. On the other hand, crystallized intelligence can be either domain-general (applicable to a wide variety of situations) or domain-specific, related only to a particular area of expertise. As a result, the researchers examined both the potential impact of domain-general crystallized intelligence and crystallized intelligence specifically related to financial literacy, or the ability to understand financial information and decisions.

The researchers reported that on average, credit scores are 13 points higher per decade of age. Turning to the impact of the two forms of intelligence examined, the researchers found that higher fluid intelligence and finance-specific crystallized intelligence were associated with higher credit scores, which is not surprising. Interestingly, domain-general crystallized intelligence did not show a statistically significant association with credit scores.

The researchers next turned to the relative contribution of fluid versus finance-specific crystallized intelligence. When they looked at the size of the associations between fluid intelligence and finance-specific crystallized intelligence, the researchers found that financial literacy had a greater impact on credit scores than fluid intelligence. Each one standard deviation increase in fluid intelligence was associated with a 22-point increase in average credit score, whereas each standard deviation increase in financial literacy was associated with a 47-point increase in credit score.

The researchers also wondered whether this impact of financial literacy was more a result of crystallized intelligence itself, or merely reflected experience using financial products. However, they found that when they statistically controlled for financial experience, the impact of financial literacy remained strong. This led them to conclude that “good financial decisions require people to comprehend financial products, not just have experience using them.” The researchers also found that personality traits did not impact the influence of fluid intelligence or financial literacy.

In addition to credit score, the researchers had participants participate in tasks related to debt management and health insurance choices. Again, higher fluid intelligence and domain-specific crystallized intelligence were associated with better performance. In the task related to health care, the researchers did not find any impact of age on the quality of performance, which they proposed may be due to the impacts of fluid intelligence and health care-specific crystallized intelligence cancelling each other out.

Taken together, while the impact of decreasing fluid intelligence with age should be of concern, the researchers conclude that domain-specific crystallized knowledge “seems to provide an alternative route to sound financial decisions—one that can improve with age.” However, since domain-general crystallized knowledge was not statistically associated with increased credit scores, this research also highlights the importance of providing the necessary education for adults to acquire the sort of financial literacy shown to have a positive relationship with credit scores. This poses the public education challenge of reaching those adults who had not previously acquired much finance-related education, and convincing them of the importance of such education. For those adults without much financial product experience, it is encouraging that this research shows that financial knowledge rather than experience appears the most important factor. Additionally, while finance-specific crystallized intelligence does have the stronger association on credit scores, the negative impact of fluid intelligence seen in this study also suggests that social and financial benefits could also result for older adults by reducing dependence on fluid intelligence. For example, the researchers suggest limiting the number of provided options or finding ways to easily sort and compare options to reduce the cognitive load on an older adult’s fluid intelligence.



Li Y, Gao J, Enkavi AZ, et al. Sound credit scores and financial decisions despite cognitive aging. PNAS (2015); 112(1): 65–69.

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