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More consumers making the grade on credit scores

by Broderick Perkins

(11/4/2011) Erate Exclusive - Test scores are improving on a credit score test administered by a national consumer advocacy organization to help consumers keep abreast of the rapidly changing credit score marketplace.

A consumer advocacy nonprofit association of nearly 300 consumer groups, Consumer Federation of America (CFA) says in the past eight months, nearly 20,000 consumers have taken its CreditScoreQuiz.org test and, on average, answered 78 percent of the questions correctly -- a better than passing grade.

That compares to an average, barely passing score of 60 percent when the quiz was administered by phone survey to a representative sample of 1,000 adults earlier this year.

CFA and VantageScore Solutions developed the quiz over concerns consumers have been challenged by a rapidly changing credit score marketplace, including how credit scores are reported and new regulations requiring the disclosure of credit scores.

When the two tested consumer knowledge early in the year they found, for example, that few knew how costly a low score could be and how scores could vary depending on the scoring system, credit report, and time the report was accessed.

VantageScore Solutions is an independently managed company that holds the intellectual property rights to VantageScore, a new generic scoring model introduced in March 2006 and created by the three major credit reporting companies — Equifax, Experian and TransUnion.

CreditScoreQuiz.org reveals:

• Credit scores reflect credit use, especially whether payments have been made on time.

• Consumers can raise poor scores by making all payments on time, by not borrowing heavily on credit cards, and most important of all, by not defaulting on a loan or filing for bankruptcy.

• The credit scores made available by the three main credit bureaus (Equifax, Experian, and TransUnion), by FICO, and by many websites vary depending on the scoring system, the credit report (each bureau maintains a separate report), and by time the report is accessed.

• While generic scores approximate the scores used by lenders, many major lenders use their own "proprietary" score for each loan applicant.

• Now, because of new federal requirements, each mortgage and consumer lender using a scoring model for loan applicant decisions must reveal the score to the applicant.

 

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Site to See: Federal Reserve's 'Credit Reports and Credit Scores'

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