Magazine article Mortgage Banking

Credit Scores Misunderstood by Many Americans

Magazine article Mortgage Banking

Credit Scores Misunderstood by Many Americans

Article excerpt

ACCORDING TO A SURVEY BY THE CONSUMER Federation of America (CFA), Washington, D.C., and Fair Isaac Corporation, Minneapolis, nearly half of American consumers do not understand key facts about credit scores.

The survey, conducted by Opinion Research Corporation (ORC) during the period of February 10 to February 13, 2005, polled 1,013 people by telephone. The sampling error is plus or minus three percentage points. The survey found that 49 percent of those questioned don't understand that credit scores measure credit risk, and 45 percent incorrectly think that increasing one's income will increase one's credit score.

"Despite all of the news coverage about credit scores over the past year, many consumers still do not understand important facts about these increasingly influential numbers," said Stephen Brobeck, CFA's executive director.

When given four definitions of a credit score, only 51 percent of respondents correctly indicated that it represents "someone's credit risk." Forty-nine percent said that it represents credit availability, debt levels or credit IQ, or that they did not know what it represents.

The respondents who were most knowledgeable about the definition of credit scores were those with incomes of more than $75,000 (66 percent), those with a college degree (63 percent) and those 35 to 44 years of age (62 percent). …

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