WASHINGTON — Although consumer understanding of credit scores has improved over the past year, it remains poor, according to the latest credit score survey commissioned by the Consumer Federation of America and Washington Mutual Bank.
Less than one-third of Americans (31%), for example, understand that credit scores indicate risk of not repaying a loan, rather than factors like knowledge of, or attitude toward, consumer credit.
The report estimated that U. S. consumers could reduce credit card finance charges by $105 annually if they raised their score by 30 points. If all consumers raised their scores by 30 points, total annual consumer savings would be an estimated $28 billion.
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In August 2005, May 2007 and June 2008, Opinion Research Corp. conducted surveys of consumer knowledge of credit scores for CFA and WaMu. In all three years, ORC surveyed more than 1,000 representative adult Americans. The margin of error in these surveys is plus or minus three percentage points.
Comparing responses in the 2005 and 2007 surveys found little improvement in consumer understanding of credit scores. But, comparing responses in the 2007 and 2008 surveys revealed that an increasing percentage of Americans understand several important facts about credit scores. For example, 28% in 2008, up from 24% in 2007, knew that 700 was the approximate lowest credit score to qualify for a low-rate mortgage.
Many Americans fail to understand that one's credit score reflects only how they use credit, not factors such as income and age. Significant percentages erroneously believe that credit scores are influenced by income (74%), age (40%), marital status (38%), the state in which they live (29%), level of education (29%) and ethnicity (15%).
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