Stephen Brobeck of the Consumer Federation of America says its latest credit score survey reveals 80% of consumers know the basic facts.
However, the national survey by the CFA and VantageScore revealed that many consumers do not understand credit score details with important cost implications:
• Most seriously, consumers greatly underestimate the cost of low credit scores. Only 22% know that a low score, compared to a high score, typically increases the cost of a $20,000, 60-month auto loan by more than $5,000.
• A significant minority do not know that credit scores are used by non-creditors. Only about half (53%) know that electric utilities may use credit scores (for example, in determining the initial required deposit), while only about two-thirds know that these scores may be used by home insurers (66%), cell phone companies (68%), and landlords (70%).
• Over two-fifths think that marital status (42%) and age (42%) are used in the calculation of credit scores. While these factors may influence the use of credit, how credit is used determines credit scores.
• Only about half of consumers (51%) know when lenders are required to inform borrowers of their use of credit scores – after a mortgage application, when a consumer does not receive the best terms on a consumer loan, and whenever a consumer is turned down for a loan.
Overall, consumers know these basics
• Credit scores are used by mortgage lenders (88%) and credit card issuers (87%).
• Key factors used to calculate credit scores are missed payments (91%), personal bankruptcy (86%), and high credit card balances (85%).
• Ethnic origin is not used to calculate these scores (believed by only 12%).
• 700 is a good credit score (81%).
To explain both credit score basics and details, CFA and VantageScore maintain an interactive credit score quiz website (www.CreditScoreQuiz.org) that allows consumers to test their credit score knowledge by answering 12 questions. The website provides succinct answers to these questions and additional information sources about credit scores.
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