Consumers have lower credit score comprehension in 2019 than in 2012, when the economy was recovering from the Great Recession, the Consumer Federation of America (CFA) reports. The culprits: a better economy and less attention being paid to credit factors.
The CFA and VantageScore Solutions tapped Engine Telephone CARAVAN to survey 1,002 adult Americans on their basic comprehension of credit scoring. They’ve been conducting this study annually since 2011. While year-to-year there wasn’t a big change, over the eight years there’s been a slow and steady decline of consumer knowledge, the CFA, a consumer advocacy group, says.
The percentage of participants giving the correct answer to each question was lower in 2019 than in 2012. For example, in 2019 only 62% knew that consumers have more than one score, down from 78% in 2012. When asked about factors used to calculate scores, only 78% (down from 89%) knew that high credit card balances were a factor and only 71% (down from 90%) knew that bankruptcy was a factor.
One reason for this gradual decline in knowledge is likely the economy’s rebound from the 2008-2009 recession. “As household income has risen and unemployment has dropped, and as consumers have paid down high mortgage and credit card debt their financial condition has improved. So, they may have felt less of a need to pay attention to their scores,” said Stephen Brobeck, the former executive director of CFA who now serves as a senior fellow. (Brobeck made his comments during a CFA teleconference on the results.)
Oddly, even as their actual knowledge has been slipping, consumers have been getting more confident. In the latest survey, 60% said their credit scoring knowledge is great, compared to only 54% in 2012. The likely explanation: Since their scores are up, consumers wrongly assume they must know more.
While knowledge about scores may be down, access to scores, through free credit score sites like Credit Karma and Credit Sesame, is up dramatically. During the teleconference, VantageScore Solution’s president and CEO Barrett Burns said 2 billion VantageScores were given away for free last year through those sites and others and the company didn’t see a correlation between more access and more knowledge of scoring.
”What we think might be happening here is they’re not looking at the content that goes with it,” said Burns. “Maybe they’re just transacting for the fun of it. We don’t know.”
To combat this issue of low credit score IQ, the CFA and VantageScore created an educational tool for consumers known as CreditScoreQuiz.org.
For the Forbes guides to managing your credit scores, see the following