Professional financial services groups, such as credit counseling agencies, advisers and financial planners, are all well aware of how important a strong credit score is in a person’s life. Many consumers are also well aware of how their credit profile impacts loan eligibility, interest rates, job prospects and even insurance rates. However, there is still a large segment of Americans who are largely uneducated about the importance of strong credit and how it drives their ability to obtain loans and keep costs low. The good news is that many say they are eager to learn more about credit.
A new survey conducted by FreeScore.com reveals that 83 percent of consumers have checked their credit scores recently, but 42 percent of these individuals lack the knowledge about how to improve their credit standing. Some said they do take their credit into account when making purchasing decisions. For example, 65 percent of participants indicated that they consider their credit score when engaging in credit-related activities such as maxing out a card, applying for a new card or skipping a payment. Further, women were more likely than men to take their scores into account when making decisions about credit usage at 68 versus 61 percent, respectively.
“The survey is an eye-opener to the fact that many people think about credit on a regular basis but don’t feel empowered to take control of their credit scores,” said Ken Chaplinfina, senior vice president of marketing for freecreditscore.com.
Learning more about credit
There are several outlets consumers can rely on to educate themselves about credit. For example, consulting credit counselors or other professionals and utilizing online resources can both be helpful and information resources for individuals. In the aftermath of the recession and a greater focus on responsible money management, budgeting and credit usage, many financial institutions also started offering online seminars and webinars that relate to these topics. These can be a great way for adults to learn more about these issues, and also introduce their children to these financial subjects to ingrain a stronger sense of financial responsibility.
During this period of education, it may also be a smart idea for consumer to avoid overspending on their credit cards. The ratio of a borrower’s balance versus their available credit limit makes up 30 percent of their score, and carrying high balances can drag down their ratings even if they make timely payments. For this reason, paying all bills on time, keeping balances low and avoiding too many credit applications is ideal.