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One in eight Americans are unaware of their credit score, according to new research.
The poll of 2,000 Americans discovered 13% of those studied have literally no idea what their current credit score is.
In fact, even of those who have checked their credit score, a whopping 46% haven’t done so in over two months.
A study conducted by OnePoll in conjunction with LendingPoint examined the credit score knowledge and lending habits of respondents.
It uncovered 71% of those studied are totally unaware of the various ramifications associated with a bad credit score.
However, people do generally understand that a low credit score impacts their quality of life. Seventy-four percent say a low or bad credit score prevents someone from the life they want to live.
Turns out, 44% didn’t know that higher rates and more restrictive terms on any approved loans can accompany a poor credit score.
In addition, 54% go on to say a low credit score can make getting approved for a loan difficult while a further 48% reveal a low credit score can cause them trouble getting a job or security clearance.
In fact, seven in 10 of those studied say they have personally felt held back in life because of a poor credit score.
“These findings are sobering," said Mark Lorimer, Chief Administrative Officer for LendingPoint. "There is no doubt, access to credit creates upward mobility and traditional lending relies almost exclusively on credit scores. People can’t solve access if they don’t know what is holding them back.”
For 45% of those studied, a low credit score meant they were denied for a loan while a further 43% experienced higher rates and more restrictive terms on approved loans.
Not to mention, a staggering 41% revealed their bad credit caused them trouble renting an apartment.
Of those who have ever rented an apartment, three in five say they were unaware that their credit score would even affect whether or not their application would be approved.
And that’s not all that surprised renters. A whopping 55% didn’t know renting an apartment would involve others looking at their credit score while a further 51% had no idea that they may need a guarantor if their credit score is too low to get an apartment.
“Your credit score is like an adult report card and unfortunately grades you on how close you live to the boomer pattern of college to credit cards to long term job to car loan to mortgage. If that’s not you, credit scores often fail you.
“In order to tell proper credit stories, you need more data from more sources," added Lorimer. Creditworthiness is not a single number — it is the product of hundreds if not thousands of decisions and behaviors that we now have the tech to decipher.”
It turns out, Americans are living in a perpetual loop of bad credit because they are unaware of the various factors that play a role in either increasing or decreasing their credit score.
A befuddling 66% of those studied assume age is a factor in determining one’s credit score while a further 77% wrongly assume having high balances on their credit card while paying them off on time won’t hurt their credit score.
And that’s not all that Americans wrongly believe when it comes to credit scores. Eighty-three percent of those surveyed wrongly think they have to keep a balance on their credit card to improve their credit.
It’s these wrong assumptions that leave the eight in 10 who are either passively or actively trying to improve their credit score in a cycle of poor credit.
“Consumers need to understand how credit impacts their future — but also, they need to realize the power they hold to change that future. A lower credit score doesn’t necessarily trap consumers in a perpetual cycle of poor credit," Lorimer said.
"For 40 years, FICO was the only tool lenders had," Lorimer said. "By over-relying on credit scores, traditional lending overlooks a lot of creditworthy people who deserve better access to money. In the U.S., nearly 50 million people fall into this category, with credit scores ranging from 580 to 720. Below 700, lenders tend to lump borrowers together and label them all ‘subprime.’
"The good news is, today we can use data and technology to understand your full credit story, not just your credit score. That means people who previously may have experienced limited access to credit have more options, and more responsible lending choices that can help them build a stronger financial profile.”
TOP 5 RAMIFICATIONS THAT COME WITH A POOR CREDIT SCORE
1. Higher rates and more restrictive terms on any approved loans 56%
2. Getting approved for a loan can be difficult 54%
3. Trouble getting a job or security clearance 48%
4. Trouble renting an apartment 44%
5. Higher insurance premiums 39%
TOP 5 NEGATIVE EXPERIENCES AMERICANS PERSONALLY DEALT WITH BECAUSE OF POOR CREDIT
1. Denied for a loan 45%
2. Higher rates and more restrictive terms on approved loans 43%
3. Trouble renting an apartment 41%
4. Trouble getting a job or security clearance 38%
5. Higher insurance premiums 35%
TOP 5 APARTMENT PROCESS SURPRISES
1. Credit score will affect whether or not application is approved 60%
2. They will look at credit score 55%
3. May need a guarantor if credit score is too low 51%
4. My salary will be analyzed 47%
5. Will have to show proof of salary 43%