Report: 25% millennials don’t know what a credit score is
ALBANY, GA (WALB) - Having a good credit score could make or break whether you can buy the dream home, take out a student loan or even start a business.
Many consumers are familiar with the all-important three digit number but often neglect it. The group most at-risk for low credit scores are young Americans.
A new survey shows 25-percent of millennials do not know what a credit score is.
LendEDU, an online marketplace for student loan refinancing, polled 500 millennials between the ages of 17 and 37 to test their knowledge of credit scores.
The results showed young American consumers have an intermediate understanding of that all-important three-digit number. Out of the 17 questions in the survey, the responses to the first question really paint the picture that millennials lack the basic knowledge of a credit score.
Which of the following best describes the true meaning of a credit score?
- style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal;">74.35% correctly answered"the number which indicates your calculated credit risk."
- style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal;">10.42% answered "the number assigned to you at birth which gives you priority from financial institutions."
- style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal;">10.22% answered "an official government system which is used to score the fairness of banks."
- style="margin-bottom:0in;margin-bottom:.0001pt;line-height:normal;">5.01% answered "the number used to track your position on the waiting list for a credit card."
That's a quarter of young Americans who don't know the definition of a credit score. We polled a few students at Albany State University, check out their responses:
"Put a credit score is something that the government used to tell you how good or bad your credit is," said one student.
"It has to do with like repaying loans or somewhat but I know if it's low you can't really get too much off of a low credit score," said another.
"The better your credit, the easier it is for you to get apartments, cars in your name," guessed another.
"Right now, I don't because you have to like build your credit and start making payments and building on it," explained one student.
According to Investopedia, a credit score is defined as a statistical number that evaluates a consumer's creditworthiness and is based on credit history. Lenders use credit scores to evaluate the probability that an individual will repay his or her debts.
The LendEDU survey also showed 50-percent correctly answered 300 to 850 as the range of possible FICO credit scores. Thirty-one percent answered 200 to 750, 13-percent answered 100 to 1000, and 7-percent answered 0 to 100.
A person's credit score ranges from 300 to 850, and the higher the score, the more financially trustworthy a person is considered to be.
Many experts consider 670 to 739 as a good credit score. So how do you build it, if it's not already there?
It starts with paying your bills on time! Late payments have the greatest impact on your credit score. And according to Credit.com if you have a history of making late payments, creditors see you as a bigger risk.
A single 30-day late payment could hurt your credit score.
Your credit utilization, the percentage of a consumer's available credit that he or she has, should be 35 percent or less.
The ratio is the number of outstanding balances on all credit cards divided by the sum of each card's limit, and it's expressed as a percentage. Credit issuers like to see a credit utilization ratio of approximately 35-percent or less.
So if you have a 10 thousand dollar credit line, keep it at 3500 or less.
Credit history -- as your credit history grows older, your credit score will rise with it. If you have a credit card or loan then you have credit history.
Companies collect this information about those loans and credit cards to establish a credit report.
This may be tough for millennials who are establishing credit during college years.
So now you know what a credit score, key factors that impact it, how do you monitor it?
The LendEDU survey shows 30-percent of young Americans believe the Federal Reserve was one of the major credit bureaus.
But according to Investopedia, In the U.S., there are several different credit bureaus, but only three that are of major national significance: Equifax, Experian, and TransUnion.
This trio dominates the market for collecting, analyzing and disbursing information about consumers in the credit markets.
It's important to note: Equifax suffered a massive hack in September, compromising 143 million people's personal data.
Some hackers had access to includes names, Social Security numbers, birth dates, addresses and some driver's license numbers.
There are several other sites where you can check your credit report for free like CredtKarma.com and myFico.com
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