Millennials (people in the 18-34 age bracket) know less about credit scores than other adult age groups, including which businesses use the scores and who collects information on which the scores are based, according to the fourth annual national credit score knowledge survey, released Monday by the Consumer Federation of America (CFA) and VantageScore Solutions LLC.
Millenials also are more likely to wrongly believe that credit repair companies can always or often be helpful in correcting errors and improving scores.
CFA expressed concerns in a report on the survey that only 50% of consumers understand the three cases when lenders that use generic credit scores are required to inform borrowers of the credit score used in the lending decision after a mortgage loan application, when 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.
A key reason for the overall lack of credit score knowledge among 18- to 34-year-olds appears to be that they are much less likely than other adult Americans to have ever obtained the free credit reports (49% vs. 74%), according to the survey.
"Obtaining their free credit reports not only allows consumers to check the accuracy of the reports but also appears to motivate them to learn more about credit scores," noted CFA Executive Director Stephen Brobeck. "Those who are interested in their credit reports are probably also interested in their credit scores. Its so easy to go online and get your free reports that this action likely motivates people to learn more about credit scores."
The survey was undertaken by ORC International from April 17-19, using a representative sample of 1,004 adult Americans interviewed on landlines or cell phones. The margin of error is plus or minus three percentage points.
Other points revealed by the survey show that a large majority of Americans actually understand a great deal about credit scores.
· More than 87% know that credit card issuers and mortgage lenders might use credit scores.
· 92% know that missed payments are included in calculating scores; 87% know that personal bankruptcy and high credit card balances are used in the equation.
· 72% know that they have more than one generic credit score.
· 72% know that the three main credit bureaus - Experian, Equifax and TransUnion - collect the information on which credit scores are most frequently based.
· 72% know that it is important to check the accuracy of ones credit reports at the three credit bureaus.
On many questions, those 18-34 years of age scored much lower than other adults. When asked about the six types of businesses ranging from credit card issuers to landlords to cell phone companies - that might use credit scores, only 18% of millennials, but 32% of older consumers, correctly identified all six. Less than half (47%) of millennials, but more than 60% 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. Half (50%) of millennials, but nearly three-fifths (59%) of those 45-64 years of age, know that credit repair companies only occasionally or are never helpful in correcting credit report errors and improving credit scores.
Millennials, however, do not delude themselves, the survey shows. Only two-fifths (40%) believe they have good or excellent knowledge about credit scores, whereas more than three-fifths (62%) of those 35 years and older think they have such knowledge.
The Consumer Federation of America is a nonprofit association of more than 250 consumer groups that was established in 1968 to advance the consumer interest through research, education and advocacy.