WASHINGTON (6/5/15)--Don’t look now, but consumers are gaining a better understanding of their credit scores.
A recent survey by the Consumer Federation of America (CFA) found that a higher percentage of Americans understand that making loan payments on time, using a credit card but keeping balances low, and avoiding opening multiple credit card accounts will bolster a low credit score or maintain a higher one.
Further, fewer Americans believe that age, marital status and ethnicity are used to calculate scores, the CFA found.
According to Barrett Burns, president/CEO, VantageScore Solutions, the improved understanding may have a snowball effect.
“We know that if consumers are educated about credit scoring, they will feel empowered and are more likely to improve their score,” Burns said.
Shortfalls do persist, however.
For example, only 20% of Americans understand that low credit scores will likely increase the finance charges on a $20,000, 60-month car loan by more than $5,000, the survey found. More than 40% believe the added cost would be less than $3,000.
“Low credit scores can deny one access to credit or increase the costs of this credit by thousands of dollars,” said Stephen Brobeck, CFA executive director. “These higher costs can often be avoided simply by making loan payments on time or by deferring purchases until loan payments are manageable.”
Still, on the whole, consumers appear to be getting the picture, as the survey also found: