**By Lew Sichelman**
***It’s incredible how much the American public doesn’t know about the very basics of their own financial well-being. Credit scores are a great example. According to a survey from the Consumer Federation of America, a large swath of otherwise decent, law-abiding citizens don’t know jack about their credit scores. And that’s too bad, because as CFA Director Stephen Brobeck pointed out, that’s going to cost them a boat-load of money.
****“Low credit scores will often cost car buyers more than $5,000 in additional finance charges and cost home purchasers tens of thousands of dollars in additional mortgage loan costs,” Brobeck said. “And low scores are likely to limit consumer access to, and increase the cost of, services such as cell phone service, electric service, and rental housing.”
****A more recent survey by the American Bankers Association found the same thing: Most consumers don’t even know their own score, despite its importance not only in determining whether they can get credit cards, auto loans and mortgages, but also in employment and insurance decisions.
****The survey of 1,000 adults conducted for the ABA by Ipsos Public Affairs, an independent market research firm, found that only 42 percent of consumers know their credit score. Fifty-six percent of respondents indicated they did not know their credit score, and 2 percent did not answer the question.
****In the CFA survey, which was done in conjunction with VantageScore Solutions, respondents were asked a wide-ranging set of questions about scoring. As many as two out of every five answered incorrectly.
****Here’s some of the highlights, or should I say low lights:
****>> 40 percent do not know that credit card issuers and mortgage lenders use credit scores in decisions about credit availability and pricing.
****>> 43 percent believe that personal characteristics such as age and marital status are used in calculating credit scores.
****>> 35 percent don’t know when lenders are required to inform borrowers of the credit score used in their lending decision.
****>> 26 percent do not know key how to raise or even maintain their scores.
****>> 36 percent believe that credit repair agencies are always or usually helpful in correcting credit report errors and improving scores.
****Hey, c’mon people, this is basic stuff. But it’s only basic because you and I deal with it on a daily basis. Credit scores have become part of the mortgage fabric. But ordinary people who buy houses only a few times in their lives don’t know any better.
****They should, though. And that’s why I believe financial literacy courses should be mandatory in high school. People need to know how to balance their checkbooks, and how to deal with credit. Yet, it surprising how few young people are taught those basics at home. It might even be shocking to find how many of their parents can’t perform those simple tasks, either. So it is left to our schools to pick up the slack.
Lew Sichelman has been covering the housing and mortgage markets for more years then he cares to remember, starting as real estate editor at the long defunct Washington Daily News and Washington Star newspapers and finishing with a three-decade stint with National Mortgage News. His weekly column, The Housing Scene, is syndicated to newspapers throughout the country.