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CU Financial Educator Sees Recent Survey's Discovery as Opportunity to Help Young People be More Financially Savvy and Gain Loyal Members
Tuesday, May 13, 2014 7:00 AM

J.R. Webster, a financial educator with Tinker FCU and a Cornerstone Credit Union League Young Professional Advisor, says he sees a recent survey’s discovery that millenials are less knowledgeable about credit scores than older Americans as an opportunity for credit unions to help young people be more financially savvy, and gain loyal members.

The fourth annual national credit score knowledge survey was released yesterday by the Consumer Federation of America (CFA) and VantageScore Solutions, LLC. It revealed that those 18-34 years of age know less about which businesses use the scores and less about who collects information on which the scores are based, while being more likely to erroneously think that credit repair companies can always or usually be useful in correcting errors and improving scores.

“This isn’t super concerning to me,” Webster tells the Leaguer. “It just shows that my generation lacks experience, and that we haven’t learned a great deal about credit scores yet. It doesn’t mean we can’t or won’t learn it.”

On many of the survey questions, those 18-34 years of age scored significantly lower than other adults:

  • When asked which of six types of businesses – ranging from credit card issuers to landlords to cell phone companies -- might use credit scores, only 18 percent of millennials, but 32 percent of older consumers, correctly identified all six.
  • Under half (47 percent) of millennials, but over 60 percent of those 45-64 years of age, know that age is not used in calculating credit scores.
  • Less than two-thirds (65 percent) of millennials, but three-quarters (75 percent) of older adults, know that the three main credit bureaus collect information on which credit scores are based.
  • Half (50 percent) of millennials, but nearly three-fifths (59 percent) of those 45-64 years of age, know that credit repair companies only occasionally or never are helpful in correcting credit report errors and improving credit scores.

Millennials, however, do not delude themselves. Only two-fifths (40 percent) think they have good or excellent knowledge about credit scores, whereas more than three-fifths (62 percent) of those 35 years and older think they have this knowledge.

“The survey certainly reinforces the importance of credit unions being engaged in financial education outreach,” Webster continued.

Last year, Webster says he taught more than 300 classes to local high school students, and credit scores is one of the many topics he focuses on. 

“I approach the lesson on credit scores and borrowing in a way that young people can relate. I ask participating students to think about what things they would consider before loaning money to a friend. Then I explain what things the credit union considers when making loan decisions,” Webster explains. “We talk about the risk-based lending model, loan to value, and debt to income ratios. Students are then broken out into groups of ‘loan committees’ and they receive a case study, which they have to analyze and make a loan decision.”

According to Webster, this exercise helps them better understand the importance of credit scores and how a score impacts their ability to borrow and at what cost.

Gambling is another financial topic that Webster spends a great deal of time on with students.

“Oklahoma’s gambling addiction rate is three times the national average, so it’s important for young people to understand how gambling affects their budget,” he tells the Leaguer.

Budgeting, checking account management, credit, and financial decision-making are other financial topics Webster addresses with high school students.

“Teaching young people about personal finance impacts them in a very meaningful way,” Webster suggests. “My goal as a financial educator is to help young people be smarter consumers. We’re [credit unions] about helping each other be successful, and if one member makes a smart decision it benefits every member because we’re a cooperative.”

Other highlights of the survey:

  • Well over four-fifths know that credit card issuers (88 percent) and mortgage lenders (87 percent) might use these scores.
  • Well over four-fifths know that missed payments (92 percent), personal bankruptcy (87 percent), and high credit card balances (87 percent) are factors used to calculate credit scores.
  • Nearly three-quarters (72 percent) know that they have more than one generic credit score.
  • Nearly three-quarters (72 percent) know that the three main credit bureaus – Experian, Equifax, and TransUnion – collect the information on which credit scores are most frequently based.
  • Nearly three-quarters (72 percent) know that it is very important to check the accuracy of one’s credit reports at the three credit bureaus.
  • Nearly three-quarters (74 percent) know that the Consumer Financial Protection Bureau is the federal agency best suited to help consumers solve individual problems.

The survey also revealed that only 42 percent know that a credit score measures the risk of not repaying a loan rather than factors such as knowledge of, or attitude to, consumer credit, and only 7 percent know that neither FICO nor VantageScore will lower one’s credit score if the inquiries are made during a one to two week window.