Credit-confused? You’re not alone. Most of us have trouble understanding the impact some actions may have on our credit scores, though many of us do know the basics.
Just half of those surveyed recently by the Consumer Federation of America (CFA) and VantageScore Solutions know that their lender must inform them about the lender’s use of a credit score in the mortgage application process, for instance, and less than half of those surveyed wrongly believe that marital status is a factor in the calculation of credit scores.
Many of us also underestimate the consequences of a low credit score, the survey found: only one-fifth of those surveyed know a low score can increase the cost of a loan.
Some of us are even in the dark when it comes to non-creditor use of our credit scores. Half of those surveyed did not know that utility companies may factor scores into the decision on the initial deposit for service, and one-third did not know that home insurance providers and landlords might also factor scores into their decisions.
“The good news is that consumers understand the basics of credit scores, such as the importance of making loan payments on time,” said Stephen Brobeck, CFA’s executive director, in a statement. “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.”
In addition to making loan payments consistently and on time, checking credit report(s), keeping credit card balances low and refraining from opening new credit accounts are all credit-wise actions, according to CFA.
Source: Consumer Federation of America (CFA)