Consumer Knowledge About Credit Improving… But Still Poor

Consumer awareness of credit scores is improving, but not enough to prevent $28 billion in credit card finance charges, according to a survey by the Consumer Federation of America and Washington Mutual, Inc.

According to the report, most Americans know why credit scores go up and down – for example, two-thirds understand that paying off a large credit card balance improves credit scores, and 80 percent know that missing monthly credit card payments lowers scores. And just about half of Americans have obtained their credit scores in the past two years.

However, the findings show that less than a third of Americans understand that a credit score reflects the risk that a consumer won't pay back a loan – most believe that it reflects factors such as their overall financial resources and that demographic factors such as income, education and age affect their score. And 59 percent did not know that maxxing out a credit card would lower their credit score.

According to estimates by Washington Mutual, a boost in one's credit score by 30 points would save a consumer $105 a year in credit card finance changes, as financial institutions offer lower interest rates to consumers with better scores. That translates to annual savings of $28 billion for all consumers.

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