Consumer advocacy group the Consumer Federation of America, along with generic credit-score provider VantageScore Solutions, released the results of new research showing that most of us don't know as much as we should about credit scores, a knowledge gap that can prove costly. According to the two organizations' survey of 1,000 Americans, more than one-fifth of respondents admitted their knowledge of credit scores was "poor," according to survey data. As it turns out, even those of us who think we know credit scores may overestimate our grasp of the facts. For instance, a significant number believe a person's age or marital status affect their credit score.
People who are proactive about their scores tend to be more aware and, as a result, be more familiar with the ins and outs of the credit-scoring system. Survey respondents who had obtained their numbers scored 10 percentage points higher on the survey questions than those who had never obtained a credit score. Even with this advantage, a shocking 71% of respondents failed to correctly answer which types of service providers use credit scores to determine who can get credit and at what price.Fewer than one-third of respondents answered correctly when asked how much more a person with a poor credit score would pay for a $20,000, 60-month auto loan than a person with a high score. The answer? Low-scoring individuals will pay an average of $5,000 more in interest over the life of the loan, a significant sum. In addition, many respondents failed to realize that non-financial transactions, such as obtaining homeowners' insurance or a cell phone contract, can be impacted by our credit scores.
Fewer than half of respondents knew that so-called credit repair services are not helpful. As we've pointed out in the past, these companies make money by promising a quick fix to your credit -- even though this is impossible for the most part, and the few things that can be done to rectify a score (such as correcting an error) can be done by the consumer, for free.
To enhance Americans' credit score knowledge, CFA and VantageScore combined forces to create an online quiz that tests peoples' savvy when it comes to credit scores. The site, creditscorequiz.org, includes the quiz as well as correct answers in case you need to brush up on your information.
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