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Credit Card Applications » News » Products » New Study: Most Americans Do Not Understand Credit Scores

New Study: Most Americans Do Not Understand Credit Scores

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New Study: Most Americans Do Not Understand Credit Scores

A recent study completed by global payment technology company Visa revealed that a large number of Americans do not have a firm grasp on the factors a credit-rating agency takes into account when it determines the numeric value of their credit score.

Visa found that, out of the participating respondents, 38.6% believe that a person`s age influences their credit score, 21.6% believe that someone`s English-speaking ability affects their score, 17.2% believe gender is a contributing factor, and 15.7% believe race plays a part. In fact, none of these attributes come into play at all when the credit scorers rate an individual. Other things that are not factors include employment history, the current interest rate on a person`s outstanding debt, where an individual lives, what her national origin is, or her savings and assets.

Jason Alderman, Senior Director of Global Financial Education, Visa Inc., explains why the findings of this report are so important: “If people believe that unchangeable factors like race, gender, and national origin impact their credit score, then there is little incentive to make changes with things that truly do make a difference, like paying bills on time,” said Alderman, according to

A person`s credit score can have an enormous impact on her life, affecting everything from her ability to secure a loan, to open a credit card account, or to find new employment.

It is likely that loan applications, in part, contribute to the reasons for the erroneous belief among many consumers that personal background information is part of what makes up their credit score. Those applications do, in fact, request that the would-be borrower provide those types of details, which lenders use in combination with a credit report to determine whether or not the applicant represents a good risk.

A credit score, a number between 300 and 850, is assigned to an individual by a credit scoring bureau and allows lenders to determine how  “creditworthy” someone is. FICO is the most commonly used scoring system.

FICO scores are comprised of different data from an individual`s credit report, including her payment history, the amount of new credit, the outstanding balance totals, the length of credit history, and the different types of credit used. It`s important that people check their credit score from time to time, in order to see if any improvements need to be made.

“Credit scores are the equivalent of our financial grade point average,” said Alderman to “Understanding your credit score is vital, so that you can take steps to improve it. Not checking your score at least once a year is like driving with your eyes closed – you are risking a financial collision.”

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