While more Americans than ever check their credit scores, fewer of them actually know HOW that score impacts their cost and use of credit. So what good is knowing your score?
The number of Americans who look at their credit score has risen steadily. Yet, I just read a survey on how little consumers actually understand about their credit scores, and it looks like we know LESS this year.
“One would think that increasing access to one’s credit scores would help increase knowledge about these scores,” said Stephen Brobeck, executive director for Consumer Federation of America (CFA). “But that apparently has not been the case, to the detriment of consumers.”
The 7th annual Credit Score Knowledge Survey of 1,000 adults confirmed our lack of credit card savvy. The survey is from CFA and VantageScore Solutions, the independent credit scoring company founded by the three U.S. credit-reporting agencies (Equifax, Experian, TransUnion).
President & CEO of VantageScore Solutions Barrett Burns, reiterated how much credit scores “…impact everything from your loan terms to the size of deposit required to acquire a mobile phone.” Having a lower credit score means paying hundreds—if not thousands—more in higher loan and service costs, he said.
Plus, those with better credit scores are typically offered a larger credit limit, thereby more ability to boost scores by using that credit card. On the other hand, increasing the credit limit for a user with a poor score and/or lack of solid income often spurs the vicious spiral of credit card debt that can’t be paid off when it continually increases.
Data from Experian (December, 2016) indicates older users have higher credit card limits. Of course, salaries and net worth usually increase with age/experience, so this makes sense.
For a great summary on credit use by age, check this infographic from Experian, which shows the:
- average debt per consumer = almost $39,000
- average debt is higher for a baby boomer than for a millennial
- average consumer uses 2.35 bank cards, carrying an average balance of $5,551
- average consumer also has 1.51 retail credit cards, with an average balance of $1,081