What do YOU know about Credit Scores?

Surveys on human behavior are a dime a dozen and generally relevant to a small segment of the population. Then, there are surveys that deal with subjects that everyone learns from. When it comes to politics and finance, most people would be uninterested in the results. And when a recent survey on credit scores was conducted in May, the outcome was predictable; between one-quarter and two-fifths of consumers were clueless on many of the questions. If the questions were posed to you, how would you score?

License: Creative Commons image source
License: Creative Commons image source

Before we get to the actual questions, we need to tell you about the survey. It was conducted by the Consumer Federation of America (CFA) and VantageScore Solutions, an up-and-coming newcomer to the credit score arena with a unique algorithm of calculating credit risk, especially for people with little or no credit history. One thousand, twenty-two American adults were asked to answer a wide range of questions regarding credit scores.

“Misperceptions about credit scores are extremely concerning. People who fail to understand exactly what can impact their score have little incentive to manage the real things that truly do make a difference; such things as paying bills on time, keeping credit card balances low, and not taking out unnecessary loans,” said Barrett Burns, President and CEO of VantageScore Solutions.

Do your credit scores make a difference in how credit card issuers decide whether to lend to you and the rates and terms of any credit agreement? Two-fifths (40%) of respondents did not know a low score may result in the denial of credit card applications or that the rates may be higher.

Do you think being married/single old or young are important factors that contribute to your credit score? Two-fifths of those who took the survey believed incorrectly that age and marital status have an impact on their scores. It is actually against anti-discrimination laws to use any personal factors to deny you credit

Will making loan payments on time raise your credit score? A whopping 94% knew the correct answer is yes.

When are lenders required to provide the credit score used in their decision? This one is a bit tricky because the rules have only been in place for a few short years, but nevertheless, it’s vital that consumers be kept informed. Between 25 – 35% of those who answered were unaware of that lenders must provide the score they are using to make their decision after you apply for a mortgage, are turned down for a loan and when you don’t receive the best price or terms.

If you agree to co-sign for a student loan, will your credit score be affected? Between 31 – 38% of respondents did not know that their score would take a hit, if student loans were mismanaged or that they would benefit from timely payments.

Does making multiple inquiries about loans or credits in a week’s time lower your score? Nearly everyone (93%) got this one wrong. The answer is no; comparison shopping will not impact your score.

What are the key ways to maintain or increase your credit score? This one came as a surprise with more than a fourth of survey participants unaware that maintaining low credit card balances and limiting the number of cards applied for at one time were important steps.

“Credit scores have become so influential in the lives of most consumers that tens of millions are severely disadvantaged by their lack of knowledge about these scores,” said Stephen Brobeck, CFA’s Executive Director. “Low credit scores will often cost car buyers more than $5000 in additional finance charges and cost home purchasers tens of thousands of dollars in additional mortgage loan costs. Low scores are likely to limit consumer access to, and increase the cost of, services such as cell phone service, electric service and rental housing.”

To help consumers learn more about credit scores, CFA and VantageScore Solutions have developed a fun, interactive way to learn more. Visit CreditScoreQuiz and test your credit score knowledge and become educated about the issue as you do. Then visit the results page to see how you stack up against the 37,400 other people who have taken the test.

About The Author: Noreen Ruth is a writer for several credit-based sites along with numerous financial blogs. Hoping to educate consumers, she uses government and other reputable sources to provide up-to-date, relevant news on money management, credit cards, debt services, saving money and just about anything in the finance field.

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