Study: Many Americans Don’t Understand Credit Scores

Photo (cc) by 401(K) 2013

It literally pays to understand how credit works, but many people just don’t get it.

A good credit score can save you thousands of dollars on mortgages and other loans. Low scores can make it more difficult to rent an apartment, get a cellphone contract, or sign up for utilities.

Unfortunately, a new study released by the Consumer Federation of America shows a large number of Americans fumble with basic information about credit scores. The group commissioned a survey of more than 1,000 people, and here’s what it found:

  • Two out of five don’t know that credit card issuers and mortgage lenders use credit scores to make decisions about credit availability and pricing.
  • Two out of five wrongly believe that age and marital status affect credit scores.
  • More than a third don’t know that their credit scores could be affected if they co-sign a loan.
  • More than a third wrongly believe that credit repair services are always or usually helpful in fixing credit report mistakes and boosting scores.
  • More than a quarter don’t know that lenders are required to inform borrowers of the credit score used in their lending decision after consumers apply for a mortgage, when they are turned down for a loan, and when they receive less than the best loan terms.
  • More than a quarter don’t know basic ways to raise or protect their scores, such as not charging even close to a card’s limit and avoiding too many credit applications.

The study also found that women usually have a better understanding of credit scores. They gave the correct response to a range of questions 5 percent to 10 percent more often than men. Young adults (under 35) understand how credit works at least as well as everyone else, although those between 35 and 44 were the most knowledgeable age group.

Want to see how smart you are about credit? CFA and VantageScore have an online credit quiz. You can learn more about how credit scores work in the video below.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
These 13 States Tax Social Security Income
These 13 States Tax Social Security Income

Uncle Sam is not the only one looking for a piece of your retirement income. Is your state on this list?

12 Expenses You May Be Tempted to Claim as Tax Deductions — but Shouldn’t
12 Expenses You May Be Tempted to Claim as Tax Deductions — but Shouldn’t

Thinking of trying to deduct a few of these things on your federal tax return? That could be a costly mistake.

12 Tech Gadgets That Make Daily Life Easier
12 Tech Gadgets That Make Daily Life Easier

These products on Amazon will ease worries and simplify your routine.

11 ‘Disposable’ Items You Should Be Reusing
The 5 Most Expensive U.S. States for Retirees
The 5 Most Expensive U.S. States for Retirees

If you have or expect to have a modest retirement income, you may want to avoid spending your golden years here.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

Am I Eligible for My Mother’s Social Security Benefit?
Am I Eligible for My Mother’s Social Security Benefit?

Can an adult daughter tap into her late mother’s benefit?

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

This Surprise Factor Can Raise Your Risk of Dementia
This Surprise Factor Can Raise Your Risk of Dementia

Nearly half of U.S. residents may face this threat.

Organize Your Home With These 10 Thrift Store Finds
Organize Your Home With These 10 Thrift Store Finds

Resolve to be clutter-free in 2021 with these secondhand purchases.

11 Laws You Could Be Breaking Without Knowing It
11 Laws You Could Be Breaking Without Knowing It

Seriously? Fibbing about the weather is a crime? This and other little-known legal traps await the unwary.

Is This Treatable Condition Causing Your High Blood Pressure?
Is This Treatable Condition Causing Your High Blood Pressure?

Researchers say too many doctors are overlooking this potential source of hypertension.

13 Things Seniors Can Get for Free — or Almost Free
13 Things Seniors Can Get for Free — or Almost Free

There are many ways to get cheap or free services and goods after reaching a certain age.

These Are the 3 Best Used Cars You Can Buy
These Are the 3 Best Used Cars You Can Buy

These vehicles boast reliability, safety and long-lasting value.

21 Items to Cut From Your Budget That You Won’t Even Miss
21 Items to Cut From Your Budget That You Won’t Even Miss

Start off the new year by implementing these small-but-smart savings strategies. They’ll soon add up.

Internet Providers Can’t Charge You for This Anymore
Internet Providers Can’t Charge You for This Anymore

Starting this month, your ISP no longer can bill you for this fee.

Taking a Multivitamin? Here’s Why You Should Reconsider
Taking a Multivitamin? Here’s Why You Should Reconsider

A new study has bad news for the millions of Americans who spend money on multivitamins.

15 Painless Ways You Can Cut Costs in 2021
15 Painless Ways You Can Cut Costs in 2021

Follow these tips to save, so you’ll have money for things that really matter.

9 Small Expenses That Are Bleeding Your Budget Dry
9 Small Expenses That Are Bleeding Your Budget Dry

Keep more of future paychecks by eliminating these budget-busting unnecessary expenses.

11 Huge Retirement Costs That Are Often Overlooked
11 Huge Retirement Costs That Are Often Overlooked

Does your retirement budget account for all of these costs?

7 Tricks to Cleaning Your Bathroom Faster
7 Tricks to Cleaning Your Bathroom Faster

These tips can get your bathroom sparkling with little time and no elbow grease.

20 Amazon Purchases We Loved in 2020
20 Amazon Purchases We Loved in 2020

These practical products made everyday life a little easier last year — and will do so in the new year, too.

10 Times You’re Right to Be a Cheapskate
10 Times You’re Right to Be a Cheapskate

Clever shoppers can save money without sacrificing quality. Here is how to do it.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.