WASHINGTON–Consumer knowledge about credit scores is at the lowest level in the past eight years–and in some cases, sharply–even Americans think they are smarter than ever, according to a new survey.
The ninth annual credit score survey, released by the Consumer Federation of America (CFA) and VantageScore Solutions, found that on most knowledge questions correct scores declined by more than 10 percentage points, and sometimes by more than 20 percentage points.
For instance, the survey found:
- 62% of respondents in 2019 correctly indicated that people have more than one credit score, vs. 78% of respondents in 2012
- 66% of respondents in 2019 correctly answered that keeping a low credit card balance helps raise a low credit score or maintain a high one, vs. 85% in 2012
However, in the same period, the proportion of respondents who said they considered their knowledge of credit scores excellent or good rose from 54% to 60%, according to the findings.
“Consumers know less about credit scores but think they know more,” said Stephen Brobeck, CFA senior fellow. “Taking our online credit score quiz provides an easy way for consumers to update their credit score knowledge.”
CFA reported more than 230,000 individuals have taken the Credit Score Quiz, developed and maintained by CFA and VantageScore.
Why the Deterioration?
“We are pleased that many consumers now have free access to their credit scores, but consumers must also take advantage of all the additional information about credit scores and credit files in order to make better credit decisions,” said Barrett Burns, president and CEO of VantageScore Solutions.
According to the two organizations, consumer knowledge levels may have deteriorated, in part, because of improvements in the overall economy and consumers’ financial condition. In 2012, large numbers of Americans faced challenging credit card and mortgage debts, so consumers may have been especially concerned about credit scores.
“Since then, as the nation’s economy and family finances recovered, and as consumers reduced unsustainable credit card and mortgage debts, consumers may have felt that it was less important to fully understand credit scores,” the organizations said. “Reports of increases in average credit scores nationwide may also have lessened people’s feelings of financial vulnerability and the need to fully learn about their scores and its impact.”
Wrong Answers
Despite an overall improvement in score levels – now averaging 680 according to Experian – a large minority of consumers have fair or poor scores (below 670).
While consumers’ knowledge of their actual credit scores has declined overall, the latest survey shows large majorities of consumers did correctly answer key knowledge questions related to important facts, the two organizations reported, noting consumers understood:
- Mortgage lenders and credit card issuers use credit scores (83% and 82% respectively)
- Missed payments are used in calculating credit scores (86%)
- Making all loan payments on time helps a consumer raise a low credit score or maintain a high one (87%)
More Unknowns
However, significant minorities of respondents did not know other key facts, the organizations found. That includes knowing:
- Cell phone companies might use credit scores in pricing services (41%)
- Borrowing from a 401k retirement account or paying a parking ticket late will not lower your credit scores (30% and 22% respectively)
- Opening several credit card accounts at the same time might lower scores (38%)
- Frequently checking credit scores will not lower their scores (38%)
- Checking the accuracy of one’s credit reports is very important (33%)
The survey was conducted by the Engine Telephone CARAVAN survey, who on April 25-28, 2019, interviewed 1,002 representative adult Americans by landline or cell phone. The survey’s margin of error is plus or minus three percentage points.