A recent report said the number of people asking for their credit score is steadily rising, but that consumers may not understand what’s behind the report and how it can affect their pocketbook. (Photo by Morgan/Creative Commons)
WASHINGTON – Phoenix resident Elizabeth Medora didn’t know her credit score until a credit card company gave her a credit tracker a few years ago, and even then she didn’t think much about it.
But that changed earlier this year when the credit tracker alerted Medora to fraudulent activity on her account from someone trying to open a new credit card in her name. She gave herself a crash course in how to protect herself and found out along the way how credit scores work.
“In my situation, an inquiry put through by a scammer dropped my score around five points,” Medora said in response to a Public Insight Network query. “I was able to get that taken off, since it wasn’t my inquiry, but it did hit home with me that every time I tried for a credit card … that inquiry was hurting my credit score.”
A credit score that can affect everything from the cost of a car loan to what you pay for your cell phone plan, according to consumer groups.
The Consumer Federation of America reported last month that while the number of people requesting at least one credit score in a year has risen steadily since 2014, the number of people who understand what that score represents to their pocketbooks has fallen.
The federation said credit scores are often used by non-credit service providers, like cell phone companies and electric utilities, to determine pricing. But the number of people who were aware of that fell 9 percent from last year, with 59 percent of people in a federation survey saying they knew about cell phone pricing and 44 percent aware of utility’s use, down from 68 percent and 53 percent, respectively.
“One would think that increasing access to one’s credit scores would help increase knowledge about these scores,” federation Executive Director Stephen Brobeck said in the report. “But that apparently has not been the case.”
The federation report also said that 56 percent of the people responding to its survey had asked for their credit score at least once in the past year, up from 49 percent in 2014.
But Phillip Day, president of the Academy of Financial Literacy, takes issue with the way the federation’s survey was constructed and the report’s suggestion that today’s consumers have less understanding of what’s involved in their credit scores.
“Today’s society is much more educated on credit, credit scores and the credit bureaus and how they work,” said Day, whose organization is based in Chandler. “The internet, various television commercials and advertisements and free access is advertised for free credit reports reaching millions more about credit scores and how they work.”
Renee Beauregard, executive director of Consumers United Association, agreed that credit scores are easily accessible online but she said few consumers take it the next step and relate that information with a credit report providing details about their score.
“Many banks and credit unions now provide an easy online tool to get your credit score with the push of a button,” Beauregard said. “So many people probably do click on that and get the score, but they aren’t correlating it with their credit report.”
For Medora, seeing her credit score jeopardized got her to pay attention.
“Keeping track of your credit report and score will help you get an idea of how each change affects you,” Medora said. “I knew too many inquiries (for new credit) would drop my score, but I didn’t know by how many points or that just one inquiry would change my score until that happened.”
Medora said she regularly checks her score now. But suggests that for people just getting started using a tracker to help monitor your credit is OK, because it’s “easier to understand than a full report.” There’s nothing wrong about starting with the basics, she said.
“Knowledge is definitely power when it comes to your credit score. Just knowing your score is a good start so you can be aware if it goes up or down,” Medora said.
EDITOR’S NOTE: Sources in the Public Insight Network informed the reporting in this story through a partnership with the Cronkite PIN Bureau. To send us a story idea or to learn more about PIN, click here.