You may know that your credit scores are very important when it comes to securing an auto loan, mortgage or new credit card. But it turns out that many Americans greatly underestimate the cost of low credit scores.
That’s according to a new credit score survey from the Consumer Federation of America (CFA) and VantageScore Solutions. The survey shows that while the majority of consumers know that mortgage lenders (88%) and credit card issuers (87%) use credit scores, only 22% are aware that a low score, compared to a high score, typically increases the cost of a $20,000, 60-month auto loan by more than $5,000.
“Low scores can add hundreds, if not thousands, of dollars to consumers’ credit each year,” Stephen Brobeck, CFA’s executive director, said in response to a question Credit.com posed during a press conference this afternoon. “If you have a bad credit score, you’re going to pay a very high price. And that’s just another important reason why people should pay attention to their credit scores.”
CFA’s and VantageScore’s findings are based on a telephone survey ORC International did in mid-April. The firm interviewed 1,005 Americans by landline and cell phone, and the margin of error for the survey was plus or minus three percentage points.
The survey also found that most people were unaware that non-creditors were using their credit scores — only about half of respondents (53%) realized that electric utilities may consider a credit score in establishing costs, like an initial deposit. However, more consumers (66%) were aware that home insurers potentially use credit scores, as do cell phone providers (68%) and landlords (70%).
Knowing Your Credit Score
Whether you’re applying for a new mortgage, car loan, credit card or even a new cell phone plan, it’s a good idea to find out your credit scores. (To see where your credit currently stands, you can view two of your credit scores for free, updated each month, on Credit.com.) And if you find that you need to improve your credit scores, you can generally do so by disputing any errors you find, paying down credit card debt and limiting new credit inquiries.
[Offer: Your credit score may be low due to credit errors. If that’s the case, you can tackle your credit reports to improve your credit score with help from Lexington Law. Learn more about them here or call them at (844) 346-3296 for a free consultation.]
More on Credit Reports & Credit Scores:
- What’s a Good Credit Score?
- How to Get Your Free Annual Credit Report
- How Credit Impacts Your Day-to-Day Life
Image: Courtney Keating