CFA Survey: Most Consumers Don't Understand Credit Reports or Scores

WASHINGTON – A new survey conducted by Opinion Research Corp. for the Consumer Federation of America found that not only do consumers lack essential knowledge about credit reports and scores, but that low- and moderate-income Americans who tend to pay the highest price for credit and are most vulnerable to inaccurate credit scores, are the least knowledgeable about credit reports and scores. CFA released the results of the survey July 29 as part of its testimony to the Senate Banking Committee on consumer knowledge related to credit reports and scores. Among the findings of the survey: *most Americans when asked to assess their knowledge of credit reports and credit scores, say their knowledge is “fair” or “poor.” Fifty percent said their knowledge of credit reports was fair or poor, and 61% indicated so for credit scores; *lower-income Americans are most likely to believe their knowledge of credit reports or scores isn’t good. More than 60% of those in household with less than $35,000 in incomes said their knowledge of credit reports was fair or poor, and nearly 70% of Americans in that income group said their knowledge of credit scores was fair or poor; *adults between the ages of 18-24 were also likely to say their knowledge wasn’t good of credit reports or scores. Sixty-two percent said their knowledge of credit reports was fair or poor, while 78% described so for credit scores. The survey also tested consumers’ knowledge of their credit scores. Only 25% said they knew what their credit score was, and that figure dropped to less than 20% for those consumers with less than $35,000 in income. Only 3% could, unprompted, name the three main credit bureaus, and only 35% of those with less than $35,000 in income said they had obtained a copy of their credit report from the three credit bureaus in the past two years. The survey also showed that most consumers aren’t aware that certain service providers such as electrical utilities and home insurers, use credit scores in deciding whether consumers can purchase a service and at what price. The CFA survey also questioned consumers on their opinions about new consumer protections being considered by Congress. Among some of their responses: *96% support and 83% strongly support that credit bureaus should do a better job verifying identities on credit applications to reduce identity theft; *94% and 78% strongly support that consumers who are denied a loan or charged a high price should be able to get from the lender a free copy of the credit report and score used by the lender to make their decision; *87% support and 77% strongly support that a bank shouldn’t be allowed to use consumers’ medical information to make credit decisions without consumers’ consent; *91% support and 76% strongly support that a bank should be required to obtain permission from consumers before it can share their financial information with other companies the bank owns. The CFA said the survey findings support the need for new consumer credit reporting and scoring protections. Consumers want easier access to their credit reports and scores, greater protections against privacy and credit reporting abuses, and the right to go after lenders in court who repeatedly make grievous reporting errors, said Travis Plukett, CFA’s Legislative Director. Plunkett said the study “provides Congress with a roadmap on how to make the Fair Credit Reporting Act work better for consumers.” He suggested the best way to achieve that is “to put strong baseline federal standards on the books and to allow the states to exceed these standards when necessary.” At that same hearing, Ranking Democrat Senate Banking Committee Member Sen. Paul Sarbanes (Md.), said testimony at the hearing made him concerned that some consumers might be getting lower credit ratings than they deserve because of incomplete information provided about them by the credit bureaus or their credit reports might inaccurately show they’ve `maxed out’ their available credit lines when in fact they haven’t. -