STAMFORD, Conn.--(BUSINESS WIRE)--VantageScore Solutions, LLC, the company behind the VantageScore® credit scoring model, and the Consumer Federation of America (CFA), a nonprofit association of over 250 consumer groups founded in 1968 to advance consumer interests through research, advocacy, and education, announced today the results of a fourth-annual survey that measured consumer knowledge of credit scoring.
The 19-question survey was administered by Opinion Research Corp. (ORC) to more than 1,000 representative American consumers. The survey follows three similar studies that VantageScore Solutions and CFA commissioned from ORC in 2010, 2011 and 2012.
The results show large percentages of consumers incorrectly answered wide-ranging questions about credit scores and their impact. For example:
- Only 42 percent of consumers know that a credit score measures the risk of not repaying a loan rather than factors such as knowledge of, or attitude to, consumer credit.
- Only half of consumers (50%) understand the three instances when lenders who use generic credit scores are required to inform borrowers of the credit score used in the lending decision – after application for a mortgage loan, whenever an application for a consumer or mortgage loan is rejected, and whenever the best terms, including lowest interest rate available, are not offered on a consumer or mortgage loan.
Survey results were also cross-tabulated based on age. The data demonstrates that younger consumers, those below the age of 35 and those considered to be in the Millennial generation, have less understanding than older consumers. For example:
- Under half (47%) of Millennials, but over 60 percent of those 45-64 years of age, know that age is not used in calculating credit scores.
- Less than two-thirds (65%) of Millennials, but three-quarters (75%) of older adults, know that the three main credit bureaus collect information on which credit scores are based.
While a knowledge gap exists in some key areas, a large majority of consumers have basic knowledge about credit scores:
- Well over four-fifths know that credit card issuers (88%) and mortgage lenders (87%) might use these scores.
- Well over four-fifths know that missed payments (92%), personal bankruptcy (87%), and high credit card balances (87%) are factors used to calculate credit scores.
- Nearly three-quarters (72%) know that they have more than one generic credit score.
“It isn’t a big surprise that older consumers know more than younger consumers about credit scoring, but the generation of consumers coming into the workforce is particularly challenged by massive student loans. A student loan can actually help establish good credit for these consumers, but the concern is that many of these consumers could miss payments and begin their financial lives deep in debt with low credit scores, putting them in a very difficult position,” said Barrett Burns, president & CEO of VantageScore Solutions. “We know that education can help consumers improve their scores, and whatever the consumer’s age, our aim is to arm him or her with accurate, unbiased information and resources to help them become good credit managers.”
As part of their educational initiative, VantageScore Solutions and CFA launched www.creditscorequiz.org, a consumer-focused website that mimics the survey. It lets consumers test their credit scoring knowledge and provides correct answers for each question as they progress through the quiz. The website is completely free and neither displays any advertising nor collects any personal data. Useful resources and real-time nationwide results are provided. Both the online quiz and a companion brochure are also available in Spanish at www.creditscorequiz.org/Espanol.
To encourage consumers to visit creditscorequiz.org, and as an extra incentive to complete the quiz, a special promotion will be running at the website through June 5. Everyone who completes the quiz through that date will be given the opportunity to enter a drawing for a $500 gift card. CFA and VantageScore encourage use of the prize to pay off a credit card or other debt, or to add to personal savings, but the prize can be used as the winner sees fit. Email addresses collected during the promotion period will be used only to identify and notify the winner, and will be discarded after the prize is awarded.
In an effort to further engage with the under-35 audience, VantageScore Solutions and Consumer Federation of America will also host a tweetchat – an online Q&A using the Twitter platform, from 3-4 p.m. Eastern time on Tuesday, May 20. All who wish to participate may find additional information using the Twitter hashtag #creditknowledge.
“This year’s survey clearly demonstrates a need to deliver educational resources to younger consumers and we’re pleased to again partner with VantageScore Solutions on the survey and to our broader educational program,” said Stephen Brobeck, executive director of CFA. “Our hope is that consumers from all walks of life take the quiz and arm themselves with the information they need to understand how credit scores work and how they can impact one’s financial life.”
The full results of the survey are available on CFA’s website.
Note on testing methodology
Many questions on the 2014 survey are the same as those asked in surveys conducted in 2011, 2012, and 2013 but adjustments to the survey questions including adding new questions, means 2014 results are not directly comparable to past results.
About VantageScore Solutions
VantageScore Solutions, LLC (www.vantagescore.com) is the independently managed company that owns the intellectual property rights to the VantageScore credit scoring models, including the recently announced VantageScore 3.0 model which provides up to 25 percent predictive improvement over earlier models and has the ability to formulate a score for 30 – 35 million previously unscoreable consumers. Initially developed by America’s three national credit reporting companies (CRCs) — Equifax, Experian and TransUnion — VantageScore Solutions’ highly predictive models use an innovative, patented and patent-pending scoring methodology that provides lenders and consumers with more consistent credit scores across all three national credit reporting companies.