Visa Inc. Survey: Credit Score Myths Run Rampant
Misconceptions include 60% who think employment history matters and 17% who believe gender impacts score
A poor credit score can mean thousands of dollars in higher interest payments
SAN FRANCISCO, Oct. 10, 2011 /PRNewswire/ -- Despite the importance of credit scores impacting everything from the ability to get a home loan to being hired for a job, a new Visa Inc. survey finds that many Americans don't know what determines a credit score. Among the findings, 60% of those surveyed incorrectly believe employment history factors in to a credit score and 17% who think gender has an impact.
Of particular concern, 42% of Americans fail to regularly check their score. Knowing your score allows you to makes changes, if needed, to improve it in advance of a major financial decision, such as applying for a mortgage. "Credit scores are the equivalent of our financial grade point average," said Jason Alderman, Senior Director of Global Financial Education, Visa Inc. "Understanding your credit score is vital so that you can take steps to improve it. Not checking your score at least once a year is like driving with your eyes closed – you are risking a financial collision."
Below are the percentages of respondents who incorrectly thought these factors are included in determining credit scores:
- Employment history: 59.9%
- Interest rates on debt: 58.7%
- Assets / savings: 53.1%
- Age: 38.6%
- Where you live: 25.3%
- National origin: 21.6%
- Ability to speak English: 21.6%
- Gender: 17.2%
- Race: 15.7%
"If people believe that unchangeable factors like race, gender and national origin impact their credit score, then there is little incentive to make changes with things that truly do make a difference, like paying bills on time," said Alderman.
An individual's credit score is a number (between 300 and 850) assigned by a credit bureau that helps lenders decide how creditworthy that person is – the higher the score, the lower the risk. The most commonly used scoring system is the FICO score. A good FICO score can mean saving tens of thousands of dollars over a lifetime in reduced interest rates on home and auto loans.
FICO scores are calculated from different data in your credit report including payment history, amounts owed, length of credit history, new credit, and types of credit used. FICO scores do not include factors such as age, national origin, gender, race, religion, education level, or marital status.
The best way to improve a credit score is to pay bills on time. Working to reduce the amount of debt that is owed is also imperative. Additionally, it's also important that when applying for and opening new credit accounts, you do so only as needed.
The survey results are based on 1,006 telephone interviews conducted among adults aged 18 or older nationally from September 8-11, 2011 in cooperation with GfK Roper OmniTel. To learn more about credit scores and how to protect or improve a credit score, visit www.whatsmyscore.org, a financial literacy program run by Visa Inc. The site also features a free FICO Score Estimator that can help consumers approximate their score.
Visa is a global payments technology company that connects consumers, businesses, financial institutions and governments in more than 200 countries and territories to fast, secure and reliable digital currency. Underpinning digital currency is one of the world's most advanced processing networks—VisaNet—that is capable of handling more than 20,000 transaction messages a second, with fraud protection for consumers and guaranteed payment for merchants. Visa is not a bank, and does not issue cards, extend credit or set rates and fees for consumers. Visa's innovations, however, enable its financial institution customers to offer consumers more choices: Pay now with debit, ahead of time with prepaid or later with credit products. For more information, visit www.corporate.visa.com.
SOURCE Visa Inc.
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