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Survey Examines Consumer Understanding of Credit Scores
Thursday, May 2, 2013 6:30 AM

While many Americans may understand how low credit scores can lead to reduced buying power, there is less recognition that high scores may indicate it’s the “right time” to buy, according to a survey from freecreditscore.com.

The survey also finds that while nearly half of respondents (49 percent) said they check their credit scores at least once per year, the rest (42 percent) check once every two years or less, including a worrisome percentage of respondents (22 percent) who never check.

Following are some helpful lessons for consumers.

  • Literacy Lesson No. 1: Keep checking credit scores often. Credit score awareness can warn of possible identity theft. A sudden, unexpected score drop may indicate fraudulent credit applications or default on a fraudulent loan. Currently, 49 percent of Americans check their credit scores at least once per year. We say, “Give yourself some credit!” (However, 22 percent never check.)
  • Literacy Lesson No. 2: Big plans? Plan ahead. According to the survey, significant expenses, including a home (31 percent), an automobile (32 percent) or a loan (28 percent), are the most common reasons for checking a credit score. Poor credit scores can interfere with those big life plans, but building and maintaining good credit can positively affect interest rates and save consumers thousands of dollars. The survey also showed that most people understand that they should check their scores before applying for a loan. That’s reason to say, “Give yourself some credit!” (Sixty-five percent of respondents also checked their scores “just to know,” and that’s not a bad thing.)
  • Literacy Lesson No. 3: A credit score can help inform purchase decisions. Understanding the impact credit-to-debt ratio has on a credit score is the sign of a savvy consumer. Online tools such as the freecreditscore.com Score Planner™ show how credit-related actions can impact scores. Commendably, per the survey, more than 75 percent of Americans would minimize credit use or postpone large purchases — or both — if they discovered they had a low credit score. Definitely, we say “Give yourself some credit!” At the opposite end, there’s opportunity for improvement. Surprisingly, if they had a high credit score, 65 percent of respondents said it would not influence them to consider large purchases sooner than planned. That decision might cost them better interest rates down the road if their scores drop before making those purchases.