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The Resource Center Credit Fraud & Credit Monitoring | article

Are You Smarter Than a 5th Grader When It Comes to Credit Score Smarts?

One would assume adults have a strong grasp of financial matters, including their credit reports and scores. However, a report from the Consumer Federation of America and VantageScore Solutions showed that might not be the case for most Americans. The survey spoke to more than 1,000 individuals and found only 60 percent of the questions were answered correctly. The lack of understanding about a good credit score may put more consumers at risk for economic difficulty. It may also leave some susceptible to fraud and identity theft.

Here’s a quiz for you about some critical credit score information that can help you find out just how well you stack up when it comes to credit score knowledge.

1. Does a credit score primarily represent the risk that a consumer may not repay a loan?
According to the survey, Americans answered this question correctly only 48 percent of the time. Credit scores’ primary use for lenders is to determine the likelihood that a consumer fails to repay a loan.

2. Do scores vary depending on the credit scoring model?
Americans correctly recognized that the strength of their credit score varies depending on the credit scoring model only 41 percent of the time.

3. Do consumers have only one credit score to their name?
On a positive note, most consumers appear to be aware that they can have several different credit scores. This question was answered correctly 71 percent of the time.

4. Do non-financial companies – such as landlords and cell phone providers – use credit reports and scores to determine an applicant’s financial health?
Once again, most respondents were aware their credit reports and scores could be used even by non-financial organizations to gauge their creditworthiness. This question was correctly answered more than 60 percent of the time.

5. What are the three top ways to maintain a good credit score?
According to the survey, Americans were able to identify three ideal credit maintenance strategies 69 percent of the time. Those strategies included making all loan payments on time, keeping each credit account’s balance under 25 percent of the card’s credit limit and avoiding opening too many credit accounts at the same time.

6. Is a person’s age taken into account when calculating their credit score.
Age is not a factor when developing credit reports and scores, though Americans incorrectly believed it was 67 percent of the time.

7. And what about marital status?
This is another factor that is ignored when calculating credit scores, though respondents acknowledged that reality only 40 percent of the time