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Low-Income Borrowers Less Likely to Understand Credit Scores

Annual credit score survey: The people most likely to need credit – those making $25K and less – have the weakest understanding on how credit scores work.

WASHINGTON – The tenth annual credit score survey, released today by the Consumer Federation of America (CFA) and VantageScore Solutions, LLC, shows that low-income households are most likely to apply for credit in the next 12 months – but they’re also most likely to know less about credit scores than households with higher incomes.

The phone survey of 1,001 representative Americans showed that 20% of households with incomes below $25,000 – but only 13% of those with incomes of at least $75,000 – intended to apply for credit in the next 12 months.

Survey takers asked credit-score related questions to gauge a borrower’s knowledge:

Percent of people, by income, who understood these credit-score concepts

  • Mortgage lenders use credit scores – 95% ($75K+ incomes) – 75% ($25K and below incomes)
  • Credit card issuers use credit scores – 92% – 76%
  • Personal bankruptcy influences scores – 92% – 72%
  • High credit card balances influence scores – 92% – 76%
  • Keeping low card balances can raise scores – 77% – 68%
  • Consumers have more than one credit score – 74% – 43%
  • 700 is usually a good credit score – 83% – 69%
  • CFPB best agency for filing a complaint – 86% – 66%

“At least one-quarter of low-income consumers lack the knowledge to help them raise low credit scores,” says Stephen Brobeck, a CFA Senior Fellow. “This lack of awareness could limit their access to credit or subject them to higher costs.”.

Low-income consumers are more likely than high-income consumers to consider their knowledge of credit scores to be fair or poor – 58% vs. 37%. Probably one reason for this perceived lack of knowledge, as well as less actual knowledge, is that low-income consumers are much less likely to have obtained or received any of their credit scores in the past 12 months – 32% vs. 59% for high-income consumers.

CFA and VantageScore developed and co-sponsor an interactive website,, that consumers can use to test their knowledge of credit scores. The website includes a 12-question quiz, available in both English and Spanish.

While low-income consumers had the least amount of knowledge about credit scores, a large number of all consumers still lack important basic knowledge:

  • Only 22% know that on a $20,000, 60-month auto loan, a borrower with a low credit score would likely pay more than $5,000 in interest compared to a borrower with a high score. Low scores may qualify borrowers for subprime auto loans only, with annual interest rates frequently exceeding 20%.
  • Only 33% know that a credit score typically measures the risk of not repaying a loan. 14% think that it measures knowledge or attitude toward consumer credit.
  • Only 50% know that an electric company can use credit scores to determine the amount of a required deposit.
  • 48% think that a person’s age is a factor used to calculate a credit score. However, only one’s use of credit actually influences their score.
  • 42% think that credit repair companies are always or usually helpful in correcting any credit report errors or taking other measures to improve one’s credit score. But most experts say these companies tend to charge relatively high fees to do something consumers could do for free.

The Consumer Federation of America is an association of more than 250 non-profit consumer groups that, since 1968, has sought to advance the consumer interest through research, education, and advocacy. VantageScore Solutions, initially developed by America’s three national credit reporting companies (CRCs) – Equifax, Experian, and TransUnion – is the independently managed company behind the VantageScore credit scoring model.

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