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Increasing number of consumers have obtained their credit scores and know much more about credit scores than others

OVER THE PAST FOUR YEARS, AN INCREASING NUMBER OF CONSUMERS HAVE OBTAINED THEIR CREDIT SCORES AND KNOW MUCH MORE ABOUT CREDIT SCORES THAN OTHERS DO

Free Online Credit Score Quiz (www.CreditScoreQuiz.org) Has Been Taken by Many Consumers to Upgrade Their Credit Score Knowledge

Washington, D.C. – The eighth annual credit score survey, released today by the Consumer Federation of America (CFA) and VantageScore Solutions, LLC, clearly shows that those recently obtaining their credit scores know much more about scoring than do those who have not obtained their scores.

The survey also reveals that, over the past four years, the percentage of consumers who have recently obtained at least one credit score has risen significantly. The proportion who said they “obtained or received any credit scores” in the past year, has risen – from 49 percent in 2014 to 57 percent in 2018.

According to the survey, potential borrowers are more likely to have obtained their score than non-borrowers. Seventy percent of those who intend to purchase a consumer or mortgage loan in the next year, compared to 57 percent who were not planning to borrow, said that they had obtained a credit score in the past year. And not surprisingly, these potential borrowers know somewhat more about credit scores than non-borrowers, with scores on individual questions that are typically 5-10 percentage points higher.

“The rising percentage of consumers who have obtained their credit scores is encouraging because those who have accessed their scores know much more than those who have not,” noted Steve Brobeck, executive director, CFA. “It is also encouraging that those who plan to borrow are more likely to have obtained their credit scores and know more about scores than non-borrowers,” he added.

To improve their credit knowledge, nearly 200,000 individuals have taken an online credit score quiz (www.CreditScoreQuiz.org) developed and maintained by CFA and VantageScore.

CreditScoreQuiz.org is one of the only resources that is free from commercial conflicts and created with both industry and advocacy input,” said Barrett Burns, president & CEO, VantageScore Solutions. “Whether you are an educator or a consumer, it’s a terrific resource that can enable financial empowerment.”

Other key survey findings include:

  • A large majority correctly identify key factors used to calculate credit scores but have an incomplete understanding of all the factors.
  • Similarly, a large majority correctly indicate some, but not all of the ways to raise credit scores.
  • Over the past four years, even though the percentage recently obtaining their credit reports (versus their credit scores) in the past year has increased (from 29 percent in 2014 to 36 percent in 2018), the percentage who say it is important to check these reports has declined (from 72 percent in 2014 to 67 percent in 2018).

The survey was commissioned by CFA and VantageScore and undertaken by ORC International, which from May 31 to June 3, 2018, interviewed 1005 representative Americans by cell phone and landline. The survey’s margin of error is plus or minus three percentage points.

Those Recently Obtaining Their Credit Score Know Much More About Scores Than Do Those Who Have Not

Those who say they have obtained at least one credit score in the past year are much more likely to say that their knowledge of scores is good or excellent than those who have not (68% vs. 45%).

In fact, those obtaining their scores recently do know more, as the table below reveals:

 

Obtained Score

Didn’t Obtain Score

Credit card issuers use scores               

94%

76%

Mortgage lenders use scores                           

93

74

Missed payments lower scores                        

94

80

High credit card balances lower scores             

88

74

Consumers have more than one score             

80

53

700 is a good credit score                               

91

74

Consumer Understanding of Factors Used to Calculate Credit Scores and How They Can Raise a Lower Score Is Incomplete

Large majorities correctly identify three key factors used to calculate credit scores – missed payments (86%), high credit card balances (81%), and personal bankruptcy (79%). 

But significant minorities also incorrectly think that age (41%) and marital status (38%) are used in this calculation. And majorities incorrectly believe that tax liens (64%), medical collection accounts less than six months old (62%), and civil judgments (63%) are used in the computation of credit scores.

Similarly, majorities correctly identified individual actions that help raise a low credit score or maintain a high one – make all loan payments on time (89%), keep credit cards balances under 25 percent of the credit limit (72%), and do not open several credit card accounts at the same time (66%). Yet, little more than half of respondents (56%) correctly identified all three factors.

And, only 21 percent know that on a $20,000, 60-month auto loan, borrowers with a low score would typically pay more than $5,000 in interest charges than would a borrower with a high 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. This can be done for free annually by contacting www.annualcreditreport.com or by calling 800-322-8228.

The Consumer Federation of America is an association of more than 250 non-profit consumer groups that, since 1968, has sought to advance the consumer interest through research, education, and advocacy.

VantageScore Solutions, initially developed by America’s three national credit reporting companies (CRCs) – Equifax, Experian, and TransUnion – is the independently managed company behind the VantageScore scoring model.

 

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