Consumers do not understand credit scores: study

A new study by a U.S. consumer group finds respondents did not understand credit scores.The survey of more than 1,000 Americans was undertaken by Opinion Research Corp. on behalf of the Consumer Federation of America (CFA) and Providian Financial. A full 47% of respondents were unaware that insurers use credit scores when underwriting homeowners’ policies, the survey found.Only one-third of respondents understood that credit scores represent the risk of not repaying a loan, rather than financial resources. Most respondents linked credit scores to income (65%), age (38%) and marital status (37%), rather than credit history. For example, more than 50% thought that a married couple has a combined credit score, when in reality credit scores are individual. And consumers were also unaware that they may carry different scores with different credit bureaus.Consumers also showed a lack of awareness of what “number” constitutes a “good” credit score and what number might result in negative response by agencies which use credit scores.The study also found that those with the lowest credit scores understood them the least.A follow-up study is planned for 2005.