Many Buyers Lack Credit Score Knowledge
Some consumers lack the knowledge about credit scores, and most importantly, how you can boost it to get better deals on home loans or other type of loans.
A survey of 1,000 consumers conducted by Opinion Research asked consumers 22 questions about credit scores. On average, consumers got 60 percent of the questions right, revealing several gaps in credit score knowledge.
"They did not understand the financial cost of a low score," says Stephen Brobeck, executive director of the Consumer Federation of America, an association of nonprofit consumer organizations. For example, a person with bad credit trying to take a $20,000, 60-month car loan, might have to pay about $5,000 or more in interest than someone with a good credit score, according to a survey by the Consumer Federation of America and VantageScore Solutions.
Many consumers also didn’t know how to boost credit scores. One common myth, for example, is that paying cash is the only way to build a good credit score. However, the amount of available credit you have isn’t what hurts your credit score and borrowers are usually better served at keeping two or three credit cards open. A credit score factors in the amount of debt you carry in relation to that available credit — and how well you pay your bills on time that matters more to lenders, the Detroit Free Post reports.
Credit scores have been dropping nationwide due to economic hardship. About a quarter of customers — nearly 43.4 million — had a credit score of 599 or below, which is considered poor risk, and likely won’t qualify them for loans. Or, they’ll have to pay dearly for mortgages or car loans, according to FICO.
Consumers are entitled to a free copy of their credit reports once a year from each of the three nationwide credit-reporting companies. Visit www.annualcreditreport.com.
Source: “Knowledge Lacking on Credit Scores,” Detroit Free Press (March 10, 2011)
Some consumers lack the knowledge about credit scores, and most importantly, how you can boost it to get better deals on home loans or other type of loans.
"They did not understand the financial cost of a low score," says Stephen Brobeck, executive director of the Consumer Federation of America, an association of nonprofit consumer organizations. For example, a person with bad credit trying to take a $20,000, 60-month car loan, might have to pay about $5,000 or more in interest than someone with a good credit score, according to a survey by the Consumer Federation of America and VantageScore Solutions.
Many consumers also didn’t know how to boost credit scores. One common myth, for example, is that paying cash is the only way to build a good credit score. However, the amount of available credit you have isn’t what hurts your credit score and borrowers are usually better served at keeping two or three credit cards open. A credit score factors in the amount of debt you carry in relation to that available credit — and how well you pay your bills on time that matters more to lenders, the Detroit Free Post reports.
Credit scores have been dropping nationwide due to economic hardship. About a quarter of customers — nearly 43.4 million — had a credit score of 599 or below, which is considered poor risk, and likely won’t qualify them for loans. Or, they’ll have to pay dearly for mortgages or car loans, according to FICO.
Consumers are entitled to a free copy of their credit reports once a year from each of the three nationwide credit-reporting companies. Visit www.annualcreditreport.com.
Source: “Knowledge Lacking on Credit Scores,” Detroit Free Press (March 10, 2011)
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