National Survey Finds Increased Credit Score Knowledge, but Gaps Remain
A national survey by consumer advocates found that more people have an understanding of how credit scores work, but gaps continue to exist.
The survey released by the Consumer Federation of America (CFA) and Vantage Score Solutions revealed a small, across-the-board improvement in consumer knowledge over the past year, but consumers are less aware of how those credit scores impact finance charges.
The report found, for example, more Americans correctly think that age, marital status, and ethnicity are not used to calculate credit scores, and a higher percentage understand that making all loan payments on time, using a credit card but keeping low balances, and avoiding opening several credit card accounts at the same time will raise a low credit score or maintain a high one.
But, only 20 percent of Americans know that low credit scores are likely to increase the finance charges on a $20,000, 60-month car loan by more than $5,000. Moreover, more than two-fifths (41 percent) incorrectly think that the additional charges would be less than $3,000.
"Low credit scores can deny one access to credit or increase the costs of this credit by thousands of dollars," CFA Executive Director Stephen Brobeck said in a statement. "These higher costs can often be avoided simply by making loan payments on time or by deferring purchases until loan payments are manageable."
In a phone survey of 1,000 people there were small increases in knowledge of which service providers may use credit scores, but there was a 4 percent increase (16 percent to 20 percent) in awareness of the cost of an auto loan with a low credit score. The report also found a three percent increase (57 percent to 60 percent) in knowing how to help raise a low credit score or maintain a high one.
There is still, however, a lack of understanding of the cost implications of failing to fix your credit report and how shopping around for the best financial deal does not necessarily have a negative impact.
Looking at demographics, the report also found that Millennials, consumers between 18 and 34, were more likely to have received a copy of their credit score or credit report than older adults. This increased frequency may account for Millennials having a greater understanding of several aspects of how credit scores affect borrowers.
Think you're a credit score pro? Find out by taking a 12-question quiz at CreditScoreQuiz.org. More than 50,000 people took the quiz last year. The quiz tests a consumer's knowledge of how credit scores are created, used and affect a person's lending potential.