Bad Credit Could Cost a Decade of Work, Data Shows

Beyond the Headlines: Personal finance news and research you may have missed

Beyond the Headlines primary

The Balance

If you’ve been following the financial news during the dog days of summer, you’ve probably heard about a few things that have been cooling off lately: retail sales, the red-hot housing market, and even inflation have all simmered down, at least a little. 

You also may have heard about the changes to pandemic-era support, and what they could mean to your pocketbook: the federal government’s ban on rental evictions has been struck down by the Supreme Court, welcome news for struggling landlords but not for millions of renters behind on their rent. Meanwhile, the new monthly child tax credit payments have started and may already be having an impact on food insecurity.

But did you know that people with low credit ratings may pay nearly $400,000 more in interest over their lifetimes than people with good credit scores? Or that data shows it’s increasingly hard for us to learn from academic research on the economy because of the sheer number of papers being published these days?

To reach beyond the biggest headlines, we scoured the latest research, surveys, studies, and commentary to bring you the most interesting and relevant personal finance news you may have missed.

What We Found

A Bad Credit Rating Could Cost a Decade of Work

Few numbers have a greater impact on personal finances than the interest rates you pay on loans, which is why even tiny movements in rates are so important for big outlays such as mortgages for home loans. Those rates are much more favorable the better your credit score, and the amount of money you can save on interest over a lifetime with a good rating is worth nearly a decade of working, data from a new report shows.

A recent estimate by Self, a financial technology company, said the average American with a fair-to-poor credit score of 620 or less will pay $486,040 over their lifetime on interest on mortgages, credit cards, car loans, and student loans. That amount is equal to 9.4 years of pay for the median full-time worker, according to Bureau of Labor Statistics figures. On the other hand, those with good-to-excellent ratings of 760 or higher will pay only $88,388 on average—a whopping $397,652 less.

The average amount of lifetime interest varied dramatically by state, and washed out to a nationwide average lifetime interest payment of $130,461. Fortunately for borrowers, credit scores have been increasing during the pandemic.

In Homebuying Market, Pros Rule the Bargaining Table

The housing market may be cooling off a bit lately, but prices are still high, and a recent survey by Fannie Mae showed the overwhelming majority of consumers think it’s a good time to sell.

Even with the cards in their favor, however, home sellers are unlikely to do as well as a real estate professional selling their own property or a professional real estate investor would, according to a recently published study by researchers at the University of Georgia that examined the negotiating power of civilian homeowners versus real estate pros.

Indeed, in deals involving buying and selling properties, real estate agents profited 3.4% more on the transactions than non-professionals did, while investors beat them by 7%, a difference that the researchers chalked up to an advantage in bargaining power. The researchers analyzed data on real estate transactions from the Multiple Listings Service, a database of real estate information, focusing on 200,000 transactions in the Dallas-Fort Worth area between 2002 and 2013. 

As to where that bargaining power comes from, the researchers had a few ideas.

“The bargaining model we use does not detail the exact reasons for the differences in the negotiated outcomes,” said Darren Hayunga, an economist at the University of Georgia, in an email, who co-wrote the paper with economist Henry J. Munneke of the same school. Hayunga hypothesized that it could be due to agents and companies having more information than individuals. Another potential reason is that since they are continuously in the market, the pros might have a competitive advantage from being able to act more quickly, he said—in other words, they’re more likely to be in the right place at the right time. 

Are You In An Open Relationship, Financially Speaking?

It’s easy for money matters to sink relationships, with divorcing couples often citing financial problems as a major cause of splitting up. That’s one reason experts say it’s important for people to communicate openly and honestly about finances with their partners.

To help couples get on the same page about saving and spending, Ally Bank recently created a tongue-in-cheek “financial vow generator” website, where each partner can enter in a few pieces of information (“the last thing I spent money on without telling my partner was a …”), and receive a custom “financial vow” that incorporates the answers, Mad-Libs-style.

On a more serious note, the financial services company found in a survey released alongside the whimsical website that people who said they were in “financially open” relationships also reported being more confident, at rates 37% higher than couples who weren’t in such relationships. The former were also more organized (by 34%) and more motivated (by 26%). Sixty-one percent of the “financially open” couples talk about money daily or weekly, according to the survey. Ally’s poll of more than 1,000 U.S. adults was conducted in July.

There Are Too Many Economics Papers, Economists Argue in Paper

If you follow financial news, you probably hear economics research papers mentioned with some frequency. Financial journalists (including those at The Balance) are always keeping their ears to the ground for the latest insights about money matters from the brightest academic minds. 

But no matter how hard journalists try, it’s unlikely they can keep up with the sheer volume of “working papers” authors produce. Unlike research that has been formally published, working papers are sort of a draft—they haven’t yet been through the rigorous and time-consuming peer review process, in which papers are picked apart by other experts before being presented to the academic community.

The process is especially time-consuming in the field of economics, with papers taking a glacial three years on average to publish, so economists often release preliminary versions of their work as a way to get their findings to the public faster—a shortcut that researchers in most other fields usually don’t take. 

That means a lot of insights are probably being overlooked, according to—you guessed it—a working paper written by researchers at the University of Hawaii and the University of California, Davis, and published by the National Bureau of Economic Research last week. It argues that the large number of working papers in circulation is causing a traffic jam on the information superhighway.

To study the problem, the authors turned their attention to the bureau's own archives and studied how much attention each working paper got. The results supported the idea of overcrowding—among 16,000 NBER working papers published between 2004 and 2019, only 43 people viewed the average paper on, the largest economics research distribution platform, and each one had a 15% chance of receiving any sort of media attention, most often only in one outlet. 

What’s more, preliminary working papers received more attention than the finalized and polished versions published in journals, suggesting that unreliable findings are getting more attention than more rigorous, peer-reviewed results. 

The researchers’ analysis showed that every time the number of NBER working papers doubles—and output increased drastically during the pandemic—each one is 30% less likely to receive media attention.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Self. “Lifetime of Interest: How Much Do People Pay in Interest During a Lifetime?

  2. Fannie Mae. “Homebuying and Selling Sentiment Remain Polarized Amid Affordability and Supply Concerns.”

  3. University of Georgia. “Examining Both Sides of the Transaction: Bargaining in the Housing Market.”

  4. National Library of Medicine. “Reasons for Divorce and Recollections of Premarital Intervention: Implications for Improving Relationship Education.”

  5. Ally. “Make the Vow To Be More Open About Money With Your Honey.”

  6. National Bureau of Economic Research. Congestion On The Information Superhighway: Does Economics Have A Working Papers Problem?

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