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Consumers know more about credit

By Jeanine Skowronski · Bankrate.com
Wednesday, June 3, 2015
Posted: 12 pm ET

Good job, America: You've learned more about your credit score over the past year.

credit-card-blog-consumers-know-more-about-credit

An annual survey from the Consumer Federation of America and VantageScore Solutions found a small, but across-the-board improvement in consumers' knowledge about those all important three-digit risk predictors.

For instance, more Americans now know that making loan payments on time, keeping credit card balances low and refraining from opening several credit card accounts at the same time are keys to maintaining a good credit score. More consumers also have gotten hip to the fact that age, marital status and ethnicity are not factored into someone's creditworthiness.

Great, but why should I care?

Credit scores, simply put, are important. They're used by lenders primarily as a way to predict your ability to repay a loan. A great credit score, among other things, nets you the lowest rates on a mortgage, auto loan or credit card. The more you know about how scores work, the better off your score -- and, subsequently, your bank account -- will be.

But, given we're a nation essentially built on credit, it's also a good sign folks are learning more about securing some. Affordable loans can help them buy things, like a house or vehicle, which, in turn, can help reinvigorate our economy.

One less thing to worry about, huh?

Not exactly, because gaps in our credit knowledge, sadly, do exist. Only a small chunk of the population (20 percent), for instance, understands how much a low credit score can cost them on an auto loan, the survey says. And even fewer Americans (8 percent) understand that popular credit scoring models group inquiries when you are shopping around for a particular type of loan.

Plus, the knowledge gap gets worse among millennials, and it doesn't bode well for the economy if young people can't score loans.

The CFA's latest survey doesn't exist in a vacuum. Other research shows that while Americans are improving, some shoddy credit practices still persist. A recent Bankrate survey, for instance, found that a whopping 35 percent of Americans have never checked their credit report -- the information in which credit scores are based upon. (Millennials and retirees were among the biggest culprits here.)

Knowing you have a good credit score can help you feel confident when you negotiate. Check your credit report and get your credit score for free at myBankrate.

How can we learn more?

The CFA has released a new version of its credit score quiz to help eliminate the remaining consumer knowledge gaps. Bankrate also has its own credit scoring quiz that may help you become more credit-savvy. And, if you're a millennial, this slideshow should clear up some common misconceptions.

At the very least, remember to always make your loan payments on time and to keep debts -- particularly on credit cards -- low. Those two practices are key when it comes to improving or building your credit score over time.

When was the last time you checked your credit? Let us know in the comments below!

Follow me on Twitter: @JeanineSko.

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