Many Americans Still Know Little about Credit Scores
May 23rd, 2013
May 23rd, 2013
A recent consumer survey reveals that many Americans still need to be educated about credit scores. About one-fourth of a representative sample of 1,022 adult Americans incorrectly answered a variety of questions about credit scores and their impact in the third-annual survey conducted by the Consumer Federation of America and VantageScore Solutions.
Between 40% and 42% of participants didn’t know that credit card issuers and mortgage lenders use credit scores when making decisions regarding the approval or disapproval of a borrower’s credit request and in pricing. Instead two-fifths of participants incorrectly believe that personal characteristics such as age and marital status are used in calculating credit scores.
Also, more than one-quarter of respondents don’t know when lenders are required to inform borrowers of the credit score used in their lending decision – 27% think they’ll be informed after applying for a mortgage; 24% when they’re turned down for a loan; and 35% when they don’t receive the best price or other terms.
Surprisingly, over 25% of people don’t know key ways to raise or maintain their credit scores, such as not applying for several credit cards at the same time and keeping their card balances low. Over a third thought that credit repair agencies are always or usually helpful in correcting credit report errors and improving scores. However, 94% did know that making loan payments on time can raise their credit score.
One question was answered incorrectly by the majority of people – only 7% knew that making several inquiries about getting a loan in a 1 to 2 week period never lowers their credit scores. So borrowers don’t have to worry about their scores being lowered when comparison shopping for a loan to get the lowest possible price.
Credit scores have become so influential in our lives that not being knowledgeable about them can cost borrowers more in additional mortgage loan costs and can likely limit access to, or increase the cost of, services like rental housing, utilities and cell phone service.
People who don’t understand the impact their credit score can have often have little incentive to manage the things that can make a difference, such as paying bills on time, keeping credit card balances low and not taking out unnecessary loans.
If you want to test your credit score knowledge and learn how to manage your credit better, you can take a similar credit scoring quiz at www.creditscorequiz.org.
For more information on credit basics or qualifying for a home loan, contact Grandview Lending.
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