M Report – Tory Barringer
Survey results released Monday show Americans—and Millennials especially—continue to have only a vague understanding of how their credit scores are calculated and used. For the latest annual survey, the fourth of its kind, more than 1,000 representative American consumers were asked 19 questions designed to gauge their knowledge of credit scoring. The study was commissioned in partnership between VantageScore Solutions and the Consumer Federation of America (CFA).
While the findings illustrate respondents are aware of a handful of facts surrounding their credit score—for example, nearly nine in 10 know credit card issuers and mortgage lenders use them, and the vast majority know that a spotty financial history can affect their score—there are still some major gaps in their knowledge. For instance, only half of consumers surveyed demonstrated a solid understanding of the three instances when lenders who use generic scores are required to inform borrowers of the credit score used in the lending decision: after a mortgage loan application, whenever a loan application has been rejected, or whenever the best terms are not available for the borrower.
Moreover, only 42 percent understand that a credit score actually measures the risk of not repaying a loan and is not a measure of credit attitudes or knowledge—a statistic CFA executive director Stephen Brobeck called “most troubling.” “Consumers should be aware that they can take steps to reduce this risk and improve their scores, most importantly, by making all loan payments on time,” Brobeck said.
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