Many
borrowers don't understand credit scores, says
survey
Most Americans do not
understand credit scores despite the scores'
increasing importance in obtaining loans, insurance,
housing and even jobs, according to the result
of the survey by the Consumer Federation of
America (CFA) and Providian Financial.
Most consumers do not
understand what credit scores measure, what
good and bad scores are, and how scores cane
improved. Thesurvey interviewed 1,027 American
adults in late July. Sateen Bareback, CFA executive
director, said credit scores should become another
key number, such as weight, that Americans keep
track of on a regular basis.
" The cost of not knowing your score and
its significance could be not only denial of
credit, but also difficulty obtaining needed
services and even a job," Bareback said.
Most consumer surveyed correctly understand
that lenders use credits score, but only a minority
knee that electric utility, home insurers and
landlords often use credits score to decide
whether to sell a service and at what price.
The good news in the survey is that most consumers-59
percent-recognize that their knowledge of credit
scores is only poor or fair.
Other finding of the survey include:
"Consumer would
be wise to check they’re periodically,
but they should definitely learn their score
before applying for a loan, insurance, an apartment
or a job,"Brobeck said. Employers are increasing
using credit scores as one measure of a potential
employee's discipline and prudent behavior.
Brobeck said. That shift comes as employers
are desperately seeking reliable information
on potential employees now that organizations
don't freely give out information on past employees
because of lawsuit fears. "Whether we like
it or not, that’s the reality," Bareback
said.
That's yet one more reason for consumers to
educate them selves about credit scores. There’s
lot of information out there about the scores,
Brobeck said, and financial institutions could
help make sure consumers understand the significance
of the scores and possibly offer their customer
free access to their credit scores. "I
think banks could probably do a little better
job of getting that information into the hands
of consumers,"Brobeck said.
