Annual Survey Reveals That Low-Income Consumers Are Most Likely To Seek Credit yet Know the Least about Credit Scores · Consumer Federation of America

CFA and VantageScore will prioritize low-income households in the dissemination of the quiz this year.  This effort will include working with organizations and networks that serve and have access to millions of low-income consumers.

While survey results indicated that low-income consumers had the least amount of  knowledge about credit scores, a large number of all consumers still lack important basic knowledge:

• Only 22 percent know that on a $20,000, 60-month auto loan, a borrower with a low credit score would likely pay more than $5,000 in interest than a borrower with a high score. Low scores may qualify borrowers for subprime auto loans only, with annual interest rates frequently exceeding 20 percent.
• Only 33 percent know that a credit score typically measures the risk of not repaying a loan. 14 percent think that it measures knowledge or attitude toward consumer credit.
• Only 50 percent know that an electric company can use credit scores to determine the amount of deposit.
• Nearly half (48 percent) think that a person’s age is a factor used to calculate a credit score. However, only one’s use of credit actually influences their scores.
• Over two-fifths (42 percent) think that credit repair companies are always or usually helpful in correcting any credit report errors or taking other measures to improve one’s credit score. Experts agree, however, these companies tend to charge relatively high fees to do what consumers could do on their own for free.

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

• Consistently making 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 credit line that is drawn down, the lower one’s credit score.
• 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 now be done for free monthly by going to annualcreditreport.com or by calling 800-322-8228.

The survey was undertaken by SSRS via phone (70% cell, 30% landline) of 1,001 representative Americans from June 16-21, 2020.  The survey’s margin of error is plus or minus 3.5 percentage points.