Not Knowing About Credit Scores Causes Problems.
What is credit? For many Americans, that's still a tricky question. The Consumer Federation of America’s new survey has found that while Americans know much more about credit scores and reports than they did even last year, there are still plenty of misconceptions about credit scores and credit histories. The second annual survey, completed voluntarily online, showed how much about credit scores Americans have learned and what exactly still befuddles consumers about credit scores and credit histories.
Credit scores are important to understand because they can deeply influence the chance of getting a loan or mortgage. A bad credit score can follow a person around for years while a good, healthy credit score can improve the chances of landing that loan, car or apartment.
Credit Scores 101
Almost every question in the credit score survey saw an increase in correct answers from 2011. Most notably was the nine point increase in participants who knew the importance of checking the accuracy of credit reports. Some aspects about credit scores are still murky though. For example, over half of participants incorrectly answered that age and marital status are used to determine credit scores and 21% answered that ethnic origin could be used to calculate credit scores. Also, only 9% understood that requesting a score multiple times in a one to two week period potentially harms a score. Even the of the most basic purpose of a credit score, to measure the risk of not paying back a loan, was misunderstood by 44% or participants.
How to Get a Credit Score
Everyone is entitled by law to one free credit report every year. There are three national consumer reporting companies that can provide you with your first report — Equifax, Experian and TransUnion. The three companies have a central website Annualcreditreport.com, which is the first step to ordering a free report. After your free report, a credit report can legally cost up to $11.
How to Raise Your Credit Score
Although credit scores can seem confusing and uncontrollable, the report points out there are many ways toimprove a credit score:
- Never max out (or even come close!) credit cards or credit accounts
- Always pay bills on time every month
- Instead of just shifting debt around to different places, pay down debt
- Don’t open a lot of accounts in a short period of time
- Check your credit report regularly to make sure it is error free
How much do you know about credit? Let us know your thoughts on Facebook or Twitter!