Most Americans Still in Dire Need for Credit Education

New findings reveal a large number of Americans still know little about credit scores indicating lenders have to amplify their financial education efforts as the mortgage market focus switches from servicing to originations.

Roughly one-quarter of a representative sample of 1,022 adult Americans participating in a survey conducted by the Consumer Federation of America and VantageScore Solutions “incorrectly answered wide-ranging questions” about basic credit score related issues.

For example, anywhere from 40% to 42% of participants do not know that credit card issuers and mortgage lenders use credit scores as their primary risk measure when they approve or disapprove a borrower credit request and assign pricing.

Also, over one-quarter of respondents do not know when lenders are required to inform borrowers of the credit score used in their lending decision: 27% think they will be informed after applying for a mortgage, 24% when they are turned down for a loan and 35% when they don’t receive the best price or other terms.

Similarly, more than one-quarter do not know key ways to raise or maintain their scores, such as keeping credit card balances low, 26%, and not applying for several cards at the same time, 28%.

Misperceptions include the belief that personal characteristics such as age and marital status are used in calculating credit scores, or that “credit repair agencies are always or usually helpful in correcting credit report errors and improving scores.”

"Misperceptions about credit scores are extremely concerning,” said Barrett Burns, president and CEO of VantageScore Solutions, because people who fail to understand their score “have little incentive” to manage it or not to take out unnecessary loans.