• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Americans don't check credit scores, reports--poll

Posted on: Tuesday, 6 September 2005, 14:34 CDT

By Jonathan Stempel

NEW YORK (Reuters) - Many Americans don't know the basics about credit scores, and are not regularly checking their credit reports for signs of fraud, a new survey shows.

The survey conducted on behalf of Capital One Financial Corp., the No. 5 U.S. credit card issuer, and the nonprofit Consumer Action was released less than a week after the expansion of a federal law that lets consumers obtain free credit reports up to three times a year.

"Lenders are increasingly using risk-based pricing to make loans," said Ken McEldowney, executive director of San Francisco-based Consumer Action, in an interview. "If you don't find out your credit score, check your credit report and correct mistakes, you're going to be totally in the dark, and run the risk of paying far higher interest rates on loans."

Lenders use credit scores to gauge how likely consumers are to pay their bills. The scores typically range from 300 to 850, and are generated by a formula that incorporates such factors as payment histories, debt owed and the frequency of credit applications. Many mortgage lenders use scores computed by Fair Isaac Corp., known as FICO scores.

According to the survey, two-thirds of Americans either did not know that 700 is considered a good credit score, or guessed wrong. The median U.S. FICO score is 723.

The survey also found that just 35.2 percent of Americans check their credit report every year. Another 22.7 percent check only when considering big purchases such as homes or cars. And 23.3 percent never check their credit report.

The Fair and Accurate Credit Transactions Act lets consumers receive one free credit report a year from each of the three major credit bureaus: Equifax Inc.; Experian, a unit of Britain's GUS, and TransUnion LLC.

This provision was intended to help combat credit card fraud and identity theft by making it easier and less expensive for consumers to spot credit blemishes.

Raising credit scores can save money.

According to a Fair Isaac Web site (http://www.myfico.com), a consumer with a 760 FICO score might pay $843 a month on a $150,000 thirty-year, fixed-rate mortgage, equal to a 5.41 percent interest rate. But a consumer with a 659 FICO score might pay $943 a month, equal to a 6.45 percent rate.

McEldowney said consumers who don't have their credit reports should get one from each bureau -- some lenders report to certain bureaus and not others -- and then after a year rotate among the bureaus every four months.

The reports don't contain FICO scores, but it costs less than $15 to get one, McEldowney said.

More details on credit reports are available on the Federal Trade Commission's Web site (http://www.ftc.gov).

Braun Research conducted the phone survey for Capital One and Consumer Action of 1,002 men and women between July 1 and July 5. The margin of error is plus or minus 3.1 percentage points.

Source: REUTERS

More News in this Category