Visa announced this Monday that it had conducted a poll with Americans during the month of December and they were able to find some very telling results. According to the results of the study, over half of Americans misunderstand at least one aspect of what goes into determining credit scores. Visa asked Americans whether they thought certain things were factored into their credit scores and would make a difference in their credit scores. The results were actually quite surprising.
Over half of Americans believed that their employment history and their assets (like property or savings accounts) were factors in the compilation of a credit score. Even more surprising was that a significant number of people believed that purely demographic factors somehow affect credit scores. For example, 38 percent of Americans surveyed believed that age is a factor, 25 percent believed that location is a factor, and even 17 percent and 15 percent believed that gender and race were considered in compiling our credit scores, respectively.
But perhaps the most problematic statistic to come from the survey is the percentage of Americans polled who do not check their credit scores. 42 percent of Americans surveyed claim that they do not receive their annual free credit report or pay for a regular score reporting service. Knowing your credit score can be a huge factor in keeping yourself out of debt and maintaining your credit score properly. According to Jason Alderman, the Senior Director of Global Financial Education for Visa, “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.”
Experts believe that the reason so many Americans are not regularly checking their credit scores is because of the perceived threat of demographic characteristics. Those who think that unchangeable factors like age or gender impact their credit score are less likely to try to keep track of their score because there is a concern that there is nothing they can do to change their credit score. It is important that we work to change this misconception in the American public about how credit scores work so that we can help people get their credit scores back on track.
As we have blogged about in the past, the way credit scores are compiled has nothing to do with your demographic criteria. Credit reporting agencies use information that is collected about you from companies where you have lines of credit. Wherever you have a line of credit, that company sends the information about whether you pay your debts on time, how much of your line of credit is being used, and how many lines of credit you have. These are the three most important factors in your credit score, but there are others which you can view here. This information is then sent to the three major credit reporting bureaus who use the information to determine your creditworthiness. An individual’s credit score is based solely on factors which are deemed relevant to the individual’s ability to repay their debts. Companies never use any of your demographic characteristics to determine your credit score.
If you would like more information about how credit scoring works, please visit our article, Credit 101. Here at Scott McCorkle’s Credit Capitol, we want you to feel like you can count on us to respect you no matter what your credit score is. If you are interested in looking for an auto loan, we hope that you will consider us in your search. For more information, please visit our contact us page or call 866-442-0871.