Bad Credit Online Magazine - Daily News and Advice on Credit, Debt and Mortgage : Americans don't understand credit scores

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September 20, 2005

Americans don't understand credit scores

According to the survey which was conducted by consumer advocacy group Consumer Action and Capital One, we, the US consumers, are pretty dumb because we "lack understanding of credit scores" among other unfortunate things. I can actually think of a few questions that lack sense, so I put my comments in italic.

"A majority of Americans surveyed either did not know (31.7 percent) or responded incorrectly (35.1 percent) when asked to define a good credit score (700)". - I wonder if the second figure is so high, because "good credit score" is not a specific number to begin with, but the range from 680 to 699. Credit scores of 700 and above are considered excellent.

"Fifty-four (54) percent of those surveyed wrongly stated that age is a factor considered in determining credit scores." - That is actually a good question. I don't think that anyone knows for sure, except those people who developed the credit scoring models for the big three. But everyone knows that insurance companies charge much more if you are unmarried, young, etc. So it is logical to follow the same model when it comes to credit scoring system. Younger consumers can be more prone to the bad money management and subsequently to credit problems then older ones.

"A majority of Americans (52 percent) do not regularly review their credit report each year. Twenty-three percent of Americans have never reviewed their credit report." - The free annual credit report option became available in December 1, 2004 and for the West only. The Eastern states that include Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Vermont, Virginia, and West Virginia plus the District of Columbia, Puerto Rico, and all U.S. territories got this option on September 1 of this year. So there weren't many options for consumers to review, unless they were denied credit or purchased credit report.

You can read this survey for your own conclusions.

 
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