Understanding credit scores is key
Despite the fact that two out of three Americans consider themselves “very” or “highly” knowledgeable when it comes to personal finance, many fall short in a number of key areas according to the results of a new survey by Consumer Action and Capital One.
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A majority of Americans surveyed either did not know or responded incorrectly when asked to define a good credit score (700).
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More than half of those surveyed wrongly stated that age is a factor considered in determining credit scores.
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A majority of Americans do not regularly review their credit report each year. Twenty-three percent of Americans have never reviewed their credit report.
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More than one-third of Americans report that they do not use a budget to manage their family’s expenses.
The survey’s most critical findings show that an overwhelming number of Americans lack basic knowledge about the many factors that impact credit scores and most consumers are not aware that they can request a copy of their credit report much less that they can receive one for free.
A credit score is a three-digit number (generally ranging from 300 to 850). The higher your credit score, the better credit risk lenders view you and your financial assets (the information helps lenders predict how risky it is to lend money to you). The credit scoring process is complex. Fair Isaac uses a variety of factors to determine a score, including a consumer’s payment history, the amount of debt currently owed, and the length of credit history, just to name a few.
The survey found that Americans aren’t taking a crucial step in preventing credit card fraud and identity theft by obtaining a copy of their credit report. Experts agree that checking your credit report for errors is the best line of protection against these and other growing crimes such as phishing and skimming.
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