These days, many consumers are becoming more conscious about the role their credit scores play in their everyday lives, but at the same time, they may not know exactly what goes into it, and what they can do to improve it.
About 42 percent of consumers have checked their credit scores in the past 12 months, and there was a relatively even split on the source of this information, between lenders and the three major credit bureaus, according to a new survey from the Consumer Federation of America. Not surprisingly, when asked to answer questions about how credit scoring works, those who had checked their standing were more likely to respond correctly than those who had not.
Overall, the number of consumers who knew what types of entities check credit scores rose 8 percentage points, while those who knew what types of companies collect the information used to create the scores jumped 7 points, the report said. More also knew that they have more than one score, what constitutes a strong rating, and the ways to increase their score, as well as the importance of making sure their credit reports are accurate.
“In the numerous consumer knowledge surveys we have undertaken over the past several decades, I have never seen such improvement from one year to the next,” said Stephen Brobeck, executive director of the CFA. “However, credit reports and scores are so important to consumers that they should try to improve knowledge that remains deficient in several key areas.”
In all, 97 percent knew that making on-time payments was crucial to maintaining a healthy credit score, while 85 percent understood that keeping balances below one-quarter of their total credit limits was also key, the report said. Another 83 percent said they knew not to open a number of new credit card accounts in a short period of time.
Usually, the only way for consumers to improve their credit scores is to make better efforts to pay all their bills and maintain low balances over the course of several months. However, checking their credit report for inaccurate information, and reporting any incorrect data they find to the bureau that issued the document can also help to quickly boost their score.
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