Survey Finds Consumers Lack Credit Score Knowledge

By Lindsay Frankel
Inside Subprime: September 16, 2020

The 10th annual credit score survey from the Consumer Federation of America and VantageScore Solutions revealed some concerning results regarding Americans’ knowledge of credit health. Experian data from 2019 shows that the average credit score in America is 703, indicating that the average consumer has “good” credit. But data from the survey shows that borrowers may not be aware of the financial impact credit score has on their interest rates. 

78 percent of Americans don’t know that a 60-month, $20,000 auto loan can cost a low credit borrower an additional $5,000 in interest when compared to a borrower with excellent credit. Borrowers with poor credit may only have access to subprime auto loans, which can have interest rates topping 20 percent. 

And Americans are also confused by how credit scores are used and what factors influence them. Notably, the survey found:

  • Only 33 percent of respondents were aware that credit score measures the risk of default. 14 percent believed credit score showed a consumer’s credit knowledge or attitude. 
  • Only half of Americans know that electric companies assess credit score when determining a deposit amount. 
  • 48 percent think that age influences your credit score. While the age of your credit history will influence your score, your age will not. 

In addition, it seems that many Americans aren’t sure where to turn for help when their credit is damaged. 42 percent think that credit repair companies are typically helpful in resolving errors and improving scores, but experts report these companies charge unnecessarily high fees for services consumers could perform themselves. 

What Differences in Credit Score Knowledge Exist Between Income Groups?

The CFA/VantageScore survey revealed that households earning less than $25,000 annually tend to have less credit score knowledge than higher income households. Yet they’re more likely to apply for credit in the next year than their higher income counterparts. While only 13 percent of households earning at least $75,000 said they planned to borrow in the next 12 months, 20 percent of low-income households said they intended to seek credit. 

Those households were less likely to answer consumer knowledge questions about credit score correctly. There are stark differences between income groups in the share of respondents answering each topic with accuracy:

QuestionIncome: $75,0000+Income: Less than $25,000
Mortgage lenders assess credit scores95%75%
Credit card issuers assess credit scores92%76%
Bankruptcy affects scores92%72%
High balances affect scores92%76%
Keeping balances low raises scores77%68%
Consumers have multiple credit scores74%43%
700 is typically a good credit score83%69%
Complaints should be filed with CFPB86%66%

Do Low-Income Americans Have Lower Credit Scores?

Since more low-income Americans lack credit score knowledge, it’s easy to assume that their credit scores would suffer as a result. It’s important to note that the data on this topic is scant, but the Federal Reserve found only a moderate correlation between credit score and income. Furthermore, the Fed concludes that “credit score distributions of high- and low-income consumers are both widely dispersed, confirming the notion that income is not a strong predictor of credit scores, or vice versa.”

Certainly, low-income households have less cash flow to pay off debt. That can result in high balances, which can lower credit scores. But previous borrowing behavior is a much better indicator of risk than income, which is exactly what credit scores intend to measure. There’s no reason why a low-income borrower can’t have a high credit score. 

How Bad Credit Can Be a Major Setback

“Low credit scores can cost consumers hundreds, and sometimes thousands, of dollars a year in higher loan and service costs,” said Stephen Brobeck, president of the CFA. That’s due to higher interest rates on loans and higher insurance premiums. For example, while the minimum credit score to get a mortgage loan is typically 620, borrowers won’t see national average interest rates unless they have a FICO score above 660. The amount of interest paid over the life of a loan can vary significantly based on credit score

FICO ScoreAverage APR

This means that on a 30-year, $200,000 home loan, a borrower with low credit would pay about $63,170 more than a high credit borrower over the life of the loan. That can seriously cut into a homeowner’s profits when it comes time to sell. 

In most states, credit score also impacts car insurance premiums, which means you’ll pay more for your auto insurance if you have a low score as well. Even just having a “good” credit score as opposed to “excellent” raises premiums an average of $214 per year, according to Consumer Reports. 

How to Improve Your Credit Score

There are several factors influencing your credit score, which means there are plenty of opportunities to improve your credit. 

FactorWeightHow to Improve
Payment history35%Make consistent on-time payments each month
Credit utilization 30%Keep your balances low and use a small share of your available credit. Pay off your debt. Request a credit limit increase. 
Credit history length15%Avoid closing old accounts
Credit mix10%Stay up-to-date with payments on a variety of types of accounts
New credit10%Avoid unnecessary hard inquiries; utilize the prequalification process if available

In addition, the CFA recommends regularly checking your credit report for errors that might be impacting your score. You can now get a free monthly report at or by calling 800-322-8228. 

For more information on the middle income consumer, subprime loans and payday loans, see our city and state financial guides including states and cities like California, Texas, Illinois and more.