Consumer surveyMost US consumers lack understanding of important credit score details

Recently, the Consumer Federation of America (CFA) published results of its sixth annual credit score survey among US-American citizens. For this, ORC International conducted a telephone survey by landline and cellular in April this year. A representative sample of 1,005 adult Americans were interviewed on their credit score literacy.

These are the central results:

  • Basic facts about credit scores are understood by a vast majority of consumers, for example that scores are used by mortgage lenders (88 per cent) and credit card issuers (87 per cent). Consumers can also identify the key factors used to calculate individual credit scores, such as missed payments (91 per cent), personal bankruptcy (86 per cent) and high credit card balances (85 per cent).
  • In contrast, many consumers are unaware that credit scores are used by non-creditors as well. Only about 53 per cent recognize that electric utilities may use credit scores (i.e. to determine the initial required deposit), while only about two-thirds know that these scores may be used by home insurers (66 per cent), cell phone companies (68 per cent) and landlords (70 per cent).
  • Only a significant minority is aware of score details and cost implications. Only 22 per cent know that a low score increases the cost of an auto loan of US$20.000 over 5 years by more than US$5.000.
  • In comparison, consumers aged between 35 and 51 years are better informed than the so-called 'millennials' between 18 and 34 years. In part, these age differences result from the fact that older people are more likely to have obtained a credit score already- hence they are more literate about it than those who have not.

Stephen Brobeck, CFA’s Executive Director, commented: "The good news is that consumers understand the basics of credit scores, such as the importance of making loan payments on time. The bad news is that this knowledge is limited and, each year, can cost them hundreds of dollars in fees on services and additional interest on consumer loans."

Source: Consumer Federation of America

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