Let’s start with the good news: Americans have come a long way in terms of monitoring their credit scores.
In fact, according to the seventh annual Credit Score Knowledge Survey, jointly released by the Consumer Federation of America and VantageScore Solutions, the percentage of people who said they obtained at least one credit score in the past year has risen from 49% in 2014 to 56% in 2017.
The bad news? Consumers’ understanding of credit scores hasn’t grown in tandem. Worse yet, the latest survey suggests their knowledge has eroded.
Case in point: A significantly smaller percentage of participants this year recognized that non-lenders use credit scores to determine approval and pricing. Only 44% were aware that electric utility companies consider credit scores, a precipitous drop from 53% back in April 2016.
Meanwhile, 59% of this year’s participants knew cell phone companies look at credit scores, a number that seems pretty positive until you consider 68% of participants were hip to that fact just last year.
Consumers also were also less aware year-over-year that:
This decline in knowledge comes at a time when free credit scores are perhaps more widely available than ever before. They’re currently accessible through multiple consumer education websites or online marketplaces. Banks and credit card issuers are also increasingly furnishing free credit scores to cardholders.
Perhaps most disheartening, the survey results indicated that participants standing to gain the most from a good credit score knew the least about how to achieve one. For instance, only 55% of participants with household incomes under $25,000 correctly identified three ways to raise a low credit score, compared to 73% of participants in households with incomes $100,000 and over.
Obviously, more must be done to help these consumers learn about credit. Remember, a low score can cost someone thousands of dollars each year in higher interest rates and service fees.
As a starting point, consumers can build and maintain good credit by making all of their loan payments on time, using only a small portion of their credit card limits, paying down debt and regularly checking their credit reports for errors. These reports are available for free once every 12 months on AnnualCreditReport.com.
VantageScore and CFA’s seventh annual credit score survey was conducted by ORC International, which interviewed over 1,000 Americans nationwide via cell phones and landlines.
Think you know more about credit than the rest of the country? You can test your credit knowledge by taking the CreditScoreQuiz.org challenge at http://creditscorequiz.org. The quiz is also available in Spanish at http://www.cuestionarioparaelpuntajedecredito.org.