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U.S. Credit Score Knowledge Dumb & Dumber in 2017

More Americans are clueless that non-credit service providers, like cell phone services and utilities, are using a their personal credit scores to set prices and to control availability. A new annual survey shows for cell phone companies this consumer awareness was down from 68% last year to 59% for 2017, and for electric utilities this awareness was down from 53% to 44%.

The findings come from the seventh annual credit score survey, by the Consumer Federation of America (CFA) and VantageScore Solutions. 

At the same time, the percentage of those who said they had obtained at least one credit score in the past year has steadily risen – from 49% in 2014, to 51% in 2015, to 54% in 2016, to 56% in 2017.

CFA says low credit scores can cost consumers hundreds, and sometimes thousands, of dollars a year in higher loan and service costs.

The good news from the survey is that a large majority of consumers correctly identified key factors influencing scores – missed loan payments (91%), high credit card balances (86%), and personal bankruptcy (85%) – and also two important ways to raise their credit scores or maintain high scores – making loan payments on time (96%) and keeping credit card balances low (80%).

Other apparent declines in consumer understanding over the past 14 months include consumer awareness that:

• a low credit score on a typical auto loan would increase loan charges by more than $5,000 (down from 25% to 18%),

• credit scores represent the risk of not repaying a loan (down from 43% to 38%),

• individuals have more than one credit score (down from 69% to 64%),

• it is very important to check the accuracy of one’s credit reports at the three main credit bureaus (down from 73% to 68%), and

• credit repair companies are never or only occasionally helpful in improving one’s credit scores (down from 54% to 47%).

Fewer Women than Men Say They Know Much About Credit Scores, But Women Actually Know More Than Men

Only 54% of female respondents, compared to 61% of male respondents, said they considered their knowledge of credit scores to be good or excellent.  Yet, on a wide range of questions, women were more knowledgeable.

• A higher percentage of men than women incorrectly indicated that a person’s age (47% v. 41%), marital status (48% v. 38%), and ethnic origin (17% v. 13%) were among factors used to calculate a credit score.

• A higher percentage of women (66%) than men (59%) correctly identified three actions that help a consumer raise a low credit score or maintain a high one.

• A higher percentage of women (72%) than men (64%) understand the importance of checking the accuracy of one’s credit reports at the three main credit bureaus. That difference may reflect, in part, the fact that a higher percentage of women (67%) than men (63%) said they had ever obtained a free copy of their credit reports.

The largest demographic differences in credit score knowledge, however, reflected income.  On many questions the difference in correct responses was well over 10 percentage points.

For example, only 55% of those with household incomes under $25,000, but 73% of those in households with incomes $100,000 and over, correctly identified three ways to raise a low credit 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.

To help consumers better understand credit scores, CFA and VantageScore maintain an interactive credit score quiz website that allows consumers to test their credit score knowledge by answering 12 questions.  The website provides succinct answers to these questions and additional information sources.

It also is available in a Spanish translation.

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