Consumer Federation of America notes and promotes credit score awareness

Washington, DC
June 18, 2018

PRESS RELEASE

OVER THE PAST FOUR YEARS, AN INCREASING NUMBER OF CONSUMERS HAVE OBTAINED THEIR CREDIT SCORES AND KNOW MUCH MORE ABOUT CREDIT SCORES THAN OTHERS DO

The following highlight some of the information released today.  Access the full report here.

Consumer Understanding of Factors Used to Calculate Credit Scores and How They Can Raise a Lower Score Is Incomplete

Large majorities correctly identify three key factors used to calculate credit scores – missed payments (86%), high credit card balances (81%), and personal bankruptcy (79%).

But significant minorities also incorrectly think that age (41%) and marital status (38%) are used in this calculation. And majorities incorrectly believe that tax liens (64%), medical collection accounts less than six months old (62%), and civil judgments (63%) are used in the computation of credit scores.

Similarly, majorities correctly identified individual actions that help raise a low credit score or maintain a high one – make all loan payments on time (89%), keep credit cards balances under 25 percent of the credit limit (72%), and do not open several credit card accounts at the same time (66%). Yet, little more than half of respondents (56%) correctly identified all three factors.

And, only 21 percent know that on a $20,000, 60-month auto loan, borrowers with a low score would typically pay more than $5,000 in interest charges than would a borrower with a high score.

How Consumers Can Raise Their Credit Scores

In brief, consumers can raise their credit scores or maintain high scores by:

  • Consistently making their loan payments on time every month. A late payment may lower one’s credit scores by dozens of points.
  •  Using a small portion of the credit available on a credit card. In general, the higher the percentage of a credit line that is drawn down, the lower one’s credit scores.
  • Paying down credit card debt rather than just shifting it to another credit card or to a home equity loan.
  • Regularly checking one’s credit reports to make sure they are error-free. This can be done for free annually by contacting http://www.annualcreditreport.com or by calling 800-322-8228.

Just 12 questions.

To improve their credit knowledge, nearly 200,000 individuals have taken an online credit score quiz (www.CreditScoreQuiz.org) developed and maintained by CFA and VantageScore.

CreditScoreQuiz.org is one of the only resources that is free from commercial conflicts and created with both industry and advocacy input,” said Barrett Burns, president & CEO of VantageScore Solutions. “Whether you are an educator or a consumer, it’s a terrific resource that can enable financial empowerment.”

Other key survey findings include:

  •  A large majority correctly identify key factors used to calculate credit scores but have an incomplete understanding of all the factors.
  • Similarly, a large majority correctly indicate some, but not all of the ways to raise credit scores.
  •  Over the past four years, even though the percentage recently obtaining their credit reports (versus their credit scores) in the past year has increased (from 29 percent in 2014 to 36 percent in 2018), the percentage who say it is important to check these reports has declined (from 72 percent in 2014 to 67 percent in 2018).

The survey was commissioned by CFA and VantageScore and undertaken by ORC International, which from May 31 to June 3, 2018, interviewed 1005 representative Americans by cell phone and landline. The survey’s margin of error is plus or minus three percentage points.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: