Skip to content

Consumers Are Getting Smarter About Credit Scores, but Remain in the Dark on Key Points

February 17, 2016

Americans have become more informed about certain aspects of their credit scores, but most still don’t know enough about the risks associated with low scores and alleged “credit repair” services, according to a recent report issued by the Consumer Federation of America (CFA) and VantageScore Solutions.

For instance, consumers taking the CFA’s Credit Score Quiz this year had a better understanding of which types of organizations use credit scores — an increase of 8% since the quiz was last administered. In addition, more of those polled knew who collects the information that influences credit scores (up 7%); what is considered a good credit score (up 4%); and the importance of checking the accuracy of credit reports (up 9%).

However, most still falsely believe that credit scores are influenced by their age (56%) and marital status (54%), while 21% think ethnic origin plays a role in determining their scores. And approximately half (51%) are under the false impression that credit repair companies are typically helpful in fixing errors and improving scores, even though such firms often charge high prices to perform services that consumers could do on their own.

What You Can Do

A typical credit score will range between 300 and 850 points. Although all lenders make decisions based on the particulars of the lending situation, generally speaking, the higher your score, the lower the perceived risk to the lender, and the more attractive the interest rate you will be offered.

A few tips for raising or maintaining a higher credit score include:

  • Paying your accounts on time and keeping your balances low. Lenders are looking for a proven track record of making timely payments. Payment history determines about 35% of your credit score.
  • Being conservative in the amount of available credit you use at any given time. About 30% of your score is determined by what the industry refers to as your “utilization ratio,” which is the amount you owe in relation to the amount of credit available to you. If that percentage is more than 50%, your score will be lower.
  • Holding on to older, unused accounts. The longer an account has been open and managed successfully, the higher your score will be.
  • Maintaining a diversified credit mix. If you hold an auto loan, a home mortgage, and credit cards that are well managed, you will generally have a higher credit score than someone whose credit consists mainly of finance companies.

Alan Sweeten, MS, CFP ® ,CRPS®
CERTIFIED FINANCIAL PLANNER ™
Chartered Retirement Plans Specialist

alan@sweetenwm.com/ Cell (760) 460-6509 / Phone (800) 841-796 /
http://www.sweetenwm.com/ North County Financial Planner

Required Attribution Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.

© 2015 Wealth Management Systems Inc. All rights reserved.

From → Recent Posts

Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: