Only one in five consumers know that bad credit scores are likely to increase finance charges by more than $5,000 over time if you’re taking out a $20,000 five-year car loan, according to a new survey.
Some consumers know that they’d pay more in interest when buying a new car, if they had a lower score but they don’t understand how big the cost will be, according to the fifth annual national credit score survey released Monday by the Consumer Federation of America and VantageScore Solutions.
Credit scores are designed to help lenders calculate the risk that a given borrower will not repay a loan.
Millennials had some larger knowledge gaps than others, too.
About 27 percent of Millennials—those age 18 through 34—did not realize that a 700 credit score is usually a good credit score. That compares with 19 percent among consumers who are at least 35.
About 39 percent of Millennials surveyed did not understand that the three main credit bureaus collect information on which scores are based. That compares with 30 percent for consumers who aren’t Millennials.
The telephone survey by cellphone and landline, undertaken by ORC International from April 9 to April 12, showed that more consumers this year, compared with the previous year, did understand that the cost of an auto loan goes up with a lower credit score.
Barrett Burns, president and CEO of VantageScore Solutions, said consumers tend to be better educated about credit scores than when the surveys first began five years ago.
About 66 percent of consumers, for example, know that making payments on time, keeping credit card balances low or paid off and not opening several credit cards at once will help raise a low credit score over time or help maintain a good score. That compares with 55 percent of consumers from last year’s survey.
Stephen Brobeck, executive director for the Consumer Federation of America, said he’s hopeful that consumers will get more information about how to improve their credit score from a revamped site that has 12 questions. The site is at creditscorequiz.org.
Both Brobeck and Burns noted that it is important for consumers to shop around for loans to make sure they’re getting the best deals.
It’s also key to make sure the information on your credit report accurately reflects your payment history and borrowing habits.
A way to get a free credit report is to visit annualcreditreport.com or call 877-322-8228.
The federal Consumer Financial Protection Bureau works with consumers to help resolve complaints about credit scores and credit reports. But before filing a complaint at consumerfinance.gov/complaint, consumers are asked to file a complaint and obtain a response from the credit bureau or other company with which you are dealing.
Source: Redeyechicago.com Susan Tompor May 8, 2015