ICFE eNEWS #11-12 - March 2nd 2011
NEW NATIONAL SURVEY REVEALS WHAT CONSUMERS KNOW AND
DON'T KNOW ABOUT CHANGING CREDIT SCORE MARKETPLACE
Take the Interactive Web Quiz
Credit Score Information
Washington, DC - The Consumer Federation of America (CFA), a nonprofit
association of nearly 300 consumer groups that was founded in 1968 to
advance the consumer interest through research, advocacy, and education
and VantageScore Solutions have released survey findings revealing that
most consumers are not aware of recent changes in the credit score
On 22 questions administered by Opinion Research Corp. to over 1000
representative Americans late last month, on average consumers answered
60 percent correctly, but most did not know who makes credit scores
available, what is a strong score, and what's the financial cost of a
There are a growing number of both generic and lender-specific credit
scores, few of which are identical. Even generic scores may vary widely
depending on both the credit report and scoring system used. For
instance, scores based on credit reports from one of the three main
credit bureaus -- Experian, Equifax, and TransUnion -- may utilize
either of the two main scoring systems -- FICO with its range of scores
from 300 to 850, or VantageScore with its range from 501 to 990.
A 700 score may be either a good score or only a fair score depending on
the scoring system." Generic scores available usually reveal this
relationship. Those generic scores using the VantageScore scoring
system provide a letter grade along with a numeric score. Most scores
currently used by mortgage lenders and made available to borrowers use
the FICO scoring system.
Government rules going into effect this July will require greater
disclosure of credit scores. "The new score disclosures will be most
beneficial to those who understand the new credit score marketplace,"
said Barrett Burns, President and CEO of VantageScore Solutions.
"That's why we are joining with CFA over the next year to inform
financial educators and individual consumers about how to best
participate in this marketplace."
New Interactive Web Quiz Provides the Latest Information Consumers Need
is a unique tool, that with widespread use, will
increase consumer knowledge about a dynamic credit score
How Consumers Scored and Who Scored Highest:
The survey was administered, using questions developed by CFA and
VantageScore, to a representative sample of more than 1000 adult
Americans January 28-31 this year. The margin of error is plus or minus
three percentage points.
On the 22-question quiz, on average, consumers answered 60 percent
correctly. Those aged 34-45 (67% correct) and those with at least
$100,000 annual incomes (66% correct) scored highest. Those at least 65
years of age (53% correct) and those with incomes belong $25,000 (58%
correct) scored lowest.
A key factor explaining score differences is whether one has obtained
one's credit scores. Consumers who had obtained their scores scored
higher (64% correct) than those who never had (54% correct).
What Most Consumers Don't Know About Credit Scores:
What Many Consumers (50-75%) Know About Credit Scores:
- A credit score mainly represents the risk of not repaying a loan
- Age (33% correct) and marital status (40% correct) are NOT factors
used to calculate a credit score.
- On a $20,000, 60-month auto loan, borrowers would usually pay $5,000
more in interest with a bad score than with a good one (30%
- A strong score depends on the scale used - over 700 for FICO and
over 800 for VantageScore (41% correct).
- The fact that generic scores are now available from numerous
web-based sources, not just from FICO or the three main credit bureaus
- Experian, Equifax, and TransUnion (25% correct).
- The fact that credit repairs are usually not helpful (46% correct).
That's because companies often over promise, charge high prices, and
perform services that consumers could do themselves.
What a Large Majority (over 80%) Know About Credit Scores:
- The three main credit bureaus - Experian, Equifax, and TransUnion
- collect information on which credit scores are most frequently based
- Most Americans have more than one generic credit score (71%
correct). In fact consumers have many scores that reflect the use of
the scoring system, the source of the credit report, and the information
in the report that's used.
- Credit scores are sometimes free (61% correct). But to obtain these
free scores, one must often sign up for, then cancel, a monthly credit
report service typically around $15 a month.
- Three key ways to raise a credit score or maintain a high score are
making all loan payments on time, for each credit card keeping balances
under 25 percent of the card's credit limit, and avoiding opening
several credit card accounts at the same time (69% correct).
- Many non-financial services - such as cell phone companies (60%
correct) and landlords (64% correct) use credit scores to determine
whether to offer a service and/or at what price.
The Most Important Things Consumers Should Know About Credit Scores:
- Missed payments (93% correct), high credit card balances (88%
correct), and many applications for new accounts at one time (81%) are
factors used to calculate credit scores.
- Mortgage lenders (86% correct) and credit card issuers (85% correct)
use these scores to determine whether to extend credit and/or at what
- Credit scores are important, influencing whether consumers can
purchase a wide range of important services and/or at what price.
- An individual has many different credit scores, which are either
generic or lender-based. Generic credit scores are available from many
sources - not just FICO and the three credit bureaus but also many
other websites. Most scores, however, are based on information in a
credit report at one of the three bureaus, although some websites allow
consumers to estimate their score by answering questions about their
- What's most important about a score is, not its absolute level, but
its relation to other scores from the same source. Most sources will
place a score in a 0-100% range, and some will add a letter grade (A, B,
C, D, or F).
- One's behavior strongly influences one's credit scores, especially
whether one makes payments on time, and it's easier to lower than to
raise scores. Carelessly making a couple credit card or mortgage
payments late may take a year of on-time payments to restore one's old
- The accuracy of information in one's credit reports at the three
bureaus - Experian, Equifax, and TransUnion - also can significantly
influence one's credit scores. You can access these reports for free
through the website AnnualCreditReport.com - or by calling
877-322-8228, and should certainly do so before obtaining a mortgage or
- Even if you have high credit scores, and especially if you have
lower ones, it is essential to comparison shop for credit. Major
lenders use somewhat different criteria in their own credit scores, and
even when they use the same score, they may assign different risks to
it. For example, using the same score for an individual, one lender may
place that person in a higher-risk subprime category while another
lender may assign that person to a lower-risk (and lower cost) prime
- Be very skeptical about the value of using credit repair companies.
Consumer protection officials agree they often overpromise, charge high
prices, and perform services, such as correcting credit report
inaccuracies, that consumers could do themselves by just contacting the
lender and the credit bureaus.
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President - Executive Director
Institute of Consumer Financial Education (ICFE)
ICFE - Institute of Consumer Financial Education -