Consumer Knowledge about Credit Scores has Steadily Declined over the Past Eight Years · Consumer Federation of America

Despite overall rising score levels – now averaging 680 according to Experian – a large minority of consumers have fair or poor scores (below 670).  Low scores can especially harm these people by:

  • Denying them access to needed credit.
  • Increasing the costs of consumer and mortgage credit they can obtain. Subprime auto loans will likely cost several thousand dollars more, and subprime mortgage loans can cost over ten thousand dollars more, compared to conventional loans.
  • Increasing deposits required by utilities and cell phone companies to obtain service.

Low credit scores also are an indicator that people may have difficulty obtaining a job.  While credit scores themselves are not used by employers, the credit reports the scores are based on are frequently utilized.  “Those with low credit scores should be aware that they are at risk not only for paying higher costs for credit and utility services, but may also struggle to obtain a good job with which to afford those higher costs,” noted CFA’s Brobeck.

While consumers’ knowledge of their actual credit scores has declined overall, the latest survey shows large majorities of consumers did correctly answer key knowledge questions related to important facts:

  • Mortgage lenders and credit card issuers use credit scores (83% and 82% respectively).
  • Missed payments are used in calculating credit scores (86%).
  • Making all loan payments on time helps a consumer raise a low credit score or maintain a high one (87%).

However, significant minorities of respondents did NOT know other key facts, for example:

  • Cell phone companies might use credit scores in pricing services (41%).
  • Borrowing from a 401k retirement account or paying a parking ticket late will not lower your credit scores (30% and 22% respectively).
  • Opening several credit card accounts at the same time might lower scores (38%).
  • Frequently checking credit scores will not lower their scores (38%).
  • Checking the accuracy of one’s credit reports is very important (33%). Lenders may have provided inaccurate information or failed to supply accurate information to credit bureaus; thus, the bureaus may have made mistakes such as adding information to the wrong file of a person with the same name.

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

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