Survey on Credit Scores Shows Credit Score Knowledge Improvement

The Consumer Federation of America (CFA) and VantageScore Solutions conducted a survey of over 1000 adult Americans by phone in late April 2012, which was administered by ORC International. This survey contained many of the same questions as a survey administered by ORC International in January 2011.

This survey indicated that consumers know more about credit scores than a year ago regarding who collects the information on which scores are based, the importance of checking credit information, what good scores are and how to increase them, and what service providers use these scores. The areas they lacked knowledge of the most were how costly low scores can be, when multiple inquiries hurt their scores, and the risks of purchasing credit repair services.

Highlights

42 percent of responders obtained or received at least one of their credit scores in the past year. 45 percent of this group said their source was a consumer or mortgage lender, and 49 percent of this group said the source was consumer or mortgage lender and/or a website using credit reports at the three main credit bureaus.

The responders that obtained a score or scores were more likely to know the correct answers than those that hadn’t obtained their score.

Responders in 2012 answered more questions correctly than those in January 2011; they knew more about credit scores. The point increase ranged from 5 to 9 points.

Questions answered correctly

In regards to who uses credit scores, most knew that mortgage lenders (94 percent) and credit card issuers (90 percent), landlords (71 percent), home insurers (71 percent) and cell phone companies (66 percent) did.

Almost all knew that missed payments (94 percent), personal bankruptcy (90 percent) and credit card balances (89 percent) influence scores.

75 percent responded that the three main credit bureaus — Experian, Equifax, and TransUnion — collect the information on which credit scores are frequently based.

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78 percent answered correctly that consumers have more than one generic score.

There was high awareness of what helps raise a low score or maintain a high one. Approximately 97 percent said making all loan payments on time, 85 percent said keeping credit card balances below 25% of credit limits, and 83 percent said not opening several credit card accounts at the same time.

82 percent were correct that it is very important to check the accuracy of their credit reports at the three main credit bureaus.

Score disclosures

They were very aware that lenders, who use generic credit scores, are required to inform borrowers of these scores.   Most (80 percent) knew that a disclosure was required after a consumer applies for a mortgage, 70 percent knew it was whenever a consumer is turned down for a loan, and 70 percent knew it was required on all consumer loans when a consumer does not receive the best terms including the lowest interest rate available.

Areas of misunderstandings

Only 29 percent were aware that, on a $20,000, 60-month auto loan, a borrower with a low credit score is likely to pay at least $5,000 more than a borrower with a high credit score.

44 percent correctly understood that a credit score measures risk of not repaying loans; compared to 22 percent that thought it measured the amount of debt, and 21 percent financial resources.

Many weren’t aware that demographics were not included in the scores.  56 percent thought that age was included, 54 percent thought marital status was included, and 21 percent thought ethic origin was included.

Only 9 percent knew multiple inquiries during a 1 to 2 week window would not lower FICO or VantageScore credit scores. But 34 percent incorrectly believed that each inquiry lowers one’s scores.

51 percent incorrectly believed that credit repair companies are “always” or “usually” helpful in correcting credit report errors and improving scores.

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How to raise your credit score

According to the Consumer Federation of America and VantageScore Solutions, you can raise your credit scores in many ways:

Pay your bills on time every month.

Don’t max out, or even come close to maxing out, your credit cards or other revolving credit accounts.

Pay down debt rather than just moving it around, as well as not opening many new accounts rapidly.