By Lending Tree, Special for USDR.
In an effort to gauge the state of financial literacy in the U.S. after Financial Literacy Month, LendingTree®, conducted a pulse survey to understand how well the average American grasps key aspects of financial health. The survey included questions related to common financial areas and consumers’ awareness of their own credit. The questions were posed to a nationally representative sample of 514 Americans over the age of 18 from April 28 to April 30, 2015 using Google Consumer Surveys.
Nearly 60 percent (59.1%) of Americans stated they do not know their credit score or provided an implausible value. Younger generations who are new to the world of credit have even less credit score awareness, with 74 percent of 18-24 year-olds admitting they do not know their credit score. The age group with the most credit score awareness were the 45-54 year-olds, 55.4 percent providing their actual score.
“Credit scores can be very influential since it represents your credit-worthiness as a borrower,” said Doug Lebda, founder and CEO of LendingTree. “Knowing your score and checking it periodically is not only important for today’s financial health, but can substantially impact your finances in the future. The better the score, the more likely you’ll be able to receive better interest rates and terms on credit-based products like mortgages and auto loans.”
When asked, “What is considered a perfect credit score?” only 16 percent of respondents were able to provide the correct answer of 850. The FICO score is the most commonly known scoring model and while other models exist, most accepted models use a maximum score of 850.
What is surprising however, is that less than 10 percent (9.4%) of all respondents knew both their own credit score and what a perfect score was. This shows that many consumers don’t truly know where they stand, even if they “know” their credit score.
Credit utilization, or the ratio of how much is owed versus the credit limit, is the second largest category factored into one’s credit score. LendingTree asked what percentage of one’s credit utilization ratio accounts for one’s credit score. Less than a quarter (24.5%) of respondents knew that credit utilization accounts for 30% of one’s credit score.
“In order to improve or maintain your credit score, you need transparency into what could have a potential impact, even though the exact credit score formulas aren’t available,” continued Lebda. “Paying bills on time, keeping card balances low and avoiding unnecessary forms of credit are the top factors in credit scoring.”
LendingTree created My LendingTree, an intuitive, personalized platform that helps consumers manage their credit with free monthly credit scores, insight into factors that could be impacting the score and recommendations to improve over time. You can additionally find a glossary of financial terms also on the LendingTree website with many additional articles and tools to help make informed financial decisions.
An infographic visually representing the survey data is available here: https://s3.amazonaws.com/lendingTree/understanding-your-financial-health.pdf
LendingTree (NASDAQ: TREE) is the nation’s leading online loan marketplace, empowering consumers as they comparison-shop across a full suite of loan and credit-based offerings. LendingTree provides an online marketplace which connects consumers with multiple lenders that compete for their business, as well as an array of online tools and information to help consumers find the best loan. Since inception, LendingTree has facilitated more than 35 million loan requests. LendingTree provides access to lenders offering home loans, personal loans, student loans, personal loans, business loans, home equity loans/lines of credit, auto loans and more. LendingTree, LLC is a subsidiary of LendingTree, Inc. For more information go to www.lendingtree.com, dial 800-555-TREE, like our Facebook page and/or follow us on Twitter @LendingTree.