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Pop quiz: By how much does a low credit score — compared with a high one — typically increase the cost of a $20,000, 60-month car loan?
Chances are you don’t know the answer, which is $5,000, according to the Consumer Federation of America’s sixth annual credit score survey. Just 22 percent of respondents got the answer right.
More than 1,000 people ages 18 and older were polled for the survey.
The results show that while most Americans now understand the basics of credit scores, many still fail to understand details that can literally cost them.
Such details include:
- The cost of low credit scores, as in the case of that car loan.
- That credit scores are used by noncreditors such as electric utilities, home insurers, cellphone companies and landlords.
- That marital status and age are not used in the calculation of credit scores.
- That lenders are required to inform borrowers of their use of credit scores after a mortgage application, when a consumer does not receive the best terms on a consumer loan and when a consumer is turned down for a loan.
More than 80 percent of Americans now understand the basics of credit scores, including:
- That credit scores are used by mortgage lenders and credit card issuers.
- The key factors used to calculate credit scores, such as missed payments, personal bankruptcy and high credit card balances.
- That ethnic origin is not used to calculate scores.
- That 700 is a good score.
Stephen Brobeck, the CFA’s executive director, says of the survey findings:
“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.”
If you are unsure of your credit score, visit Credit Sesame for a free score.
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