Content Head at Skeps. Crafting stories that seek to inspire customers.
Credit scores range from 300 to 850 and are used for more reasons than people tend to realize. It is believed that higher credit scores are the most effective and can save your customers thousands of dollars over time.
The Annual Credit Score Survey co-produced by the Consumer Federation of America (CFA) and VantageScore Solutions examines how much Americans know about their credit system.
According to their report, the average score might have surpassed the previous year’s number of 701 but 40 percent of the American citizens have no clue about how this pivotal number is calculated. Many of them might be aware of their credit scores but not everyone understands how they compare with their compatriots.
The survey tested topics associated with the overall credit process including; how credit scores are calculated, how are these obtained and the best ways to keep credit scores high.
Let us closely analyze each of these findings.
The CFA found that although the majority of respondents were of the view that missed payments, high credit card balances and personal bankruptcy are the contributing factors in the computation of credit scores but, 40 percent of Americans agreed that they have no idea how their credit score is determined.
Room for improvement
The respondents were seen listing some incorrect items that they thought were considered while calculating a credit score. These items included age, marital status, tax liens, and civil judgments to name a few. The report also highlighted the importance of understanding what you’re being assessed on.
57 percent of the individuals sought their credit score at least once in 2018, which was an 8 percent increase from 2014. Most of these individuals were potential borrowers, which suggests that they are aware of the importance of credit scoring in securing a loan.
Room for improvement
The historical data breach by one of the major credit bureaus in the US or the high frequency of errors on credit reports is a testament that borrowing shouldn’t be the only reason for regular upkeep. The credit process involves multiple parties such as the consumers, lenders and the credit bureaus and the information moves from one to the other. In such a vulnerable milieu, errors are inevitable, and surveillance is the key.
The survey highlighted that most of the people were able to recognize ways to either increase or keep their credit score high. 86 percent agreed making loan payments on time is necessary. 72 percent said that keeping credit card balances under 25 percent of the credit limit is the key and 66 percent admitted to avoiding application for several credit accounts at the same time.
Room for improvement
The respondents were able to identify one of the three methods to improve credit scores, but none could identify all three together. Learning score-boosting tactics will offer better results than performing just one or two.
Last but not least, the survey highlighted that even though many Americans claim ignorance as to the inner workings of credit scoring, a significant number might be underestimating how much they know.
The findings also suggested that there is a spike in interest towards the know-how of the credit process than ever before. Under the Fair Credit Reporting Act, Americans are entitled to one free credit report a year from each of the three main credit bureaus: Experian, Equifax, and TransUnion.
This allows Americans to check their scores and dispute any errors immediately. Taking advantage of these credit checks can help consumers become more familiar with the credit process.
Many platforms are educating their customers on what affects their credit scores. On the other hand, companies like Skeps are building an innovative platform that enables lenders and merchants to collaborate and facilitate consumer financing where credit applications are evaluated against multiple lenders with a single credit pull.
This leads to customers getting multiple offers from various lenders without affecting their credit scores.
(Disclaimer: The author works at Skeps)