Released: July 27, 2007

Study: Consumers don’t grasp credit scores

Source: Eileen Alt Powell, Associated Press [Forbes]

Not paying attention to your credit score can cost you a lot of money.

Many people don’t know that their score - a three-digit number derived from an analysis of how they handle debt - is the key determinant of what interest rate they’ll pay on credit cards, auto loans and home mortgages. The lower a person’s score is, the higher the interest rate and, therefore, the higher the cost for the loan.

A new study by the Consumer Federation of America and Washington Mutual Inc., the Seattle-based savings bank, found that fewer than six out of 10 Americans have obtained their credit scores, and half of those surveyed consider their understanding of the scores as “fair” or “poor.”

Stephen Brobeck, executive director of the nonprofit CFA, which is based in Washington, D.C., said he found the statistics disturbing because consumers can’t work to improve their scores if they don’t know what the scores are.

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