July 9, 2024 – A declining credit rating later in life might be an early warning sign for dementiain response to a brand new evaluation by the Federal Reserve Bank of New York.
Credit scores are used to predict the likelihood that an individual will repay a loan on time and are necessary for people in search of a mortgage, bank card or automobile loan. Factors that may affect an individual's credit rating include their history of paying bills on time – including medical bills – current unpaid debts, how much available credit is used, latest credit applications and whether any debts have been referred to a group agency or resulted in foreclosure or bankruptcy.
The new reportentitled “The Financial Consequences of Undiagnosed Memory Disorders” is predicated on reporting data from credit agency Equifax, which were merged with Medicare data by linking people’s Social Security numbers. The evaluation was based on a representative sample with 14 years of information for greater than 2.4 million people. The estimated incidence of Alzheimer's disease or related disorders was almost 1% amongst those aged 65 to 74, almost 3% amongst those aged 75 to 84, and just over 6% amongst those aged 85 and over.
The researchers found that individuals were more prone to default on payments within the five years before being diagnosed with Alzheimer's disease or the same illness.
“The harmful financial impact of undiagnosed memory impairment exacerbates the already significant financial pressures faced by households when diagnosed with a memory impairment,” the authors wrote. “Our findings support the potential utility of credit report data to facilitate early identification of individuals at risk for memory impairment.”
Late payments on bank card bills were observed as early as five years before diagnosis, and patterns of late payments by mortgage borrowers were observed within the three years before diagnosis.
Specifically, researchers reported that the likelihood of late bank card payments increased by 21% two years before diagnosis and the likelihood of late mortgage payments increased by 11%, compared with payment trends six years before diagnosis. The average delinquent mortgage balance amongst those that were eventually diagnosed was $2,910, and the typical delinquent bank card balance amongst cardholders who were eventually diagnosed was $384.
“These changes also reduce access to credit and affect credit limits and interest rates on credit cards and personal loans – all at a time when household financial needs are likely to increase to pay for the significant care and related costs associated with later stages of memory impairment,” the authors write.
Cognitive functioning has long been linked to an individual's financial behavior, from their wealth and investment performance to mortgage and bank card problems, the report's authors noted. Previous research has shown that along with making poor financial decisions, individuals with cognitive impairments are at increased risk of monetary exploitation.
Problems paying bills on time have long been on the list of potential Early warning signs of dementia, in addition to other cognitive changes that affect memory, considering, and judgment. Psychological changes are also possible, and symptoms vary from individual to individual. Most dementia diagnoses are made after an individual reaches age 65.