Consumers Know Little About Credit Reporting

Only 25% of Americans Surveyed are Very Knowledgeable About How Their Credit Reports are Compiled

Sandra Parsons
MoneyTips Contributor

Credit Rating Borrowing

Consumers Know Little About Credit Reporting
May 17, 2019

A recent survey by Credit Takeoff revealed that although the majority of the 500 American respondents prioritize having a good credit score, many have a poor understanding of how credit scores and credit reporting work.

Only 28% Are Very Knowledgeable About How Their Credit Score is Calculated

The results of the survey suggest that Americans don't have a solid understanding of how credit scores are calculated. Only 28% of respondents report being very knowledgeable on the subject, while 49% are somewhat knowledgeable. Twenty-three percent admitted to not being very knowledgeable about how their credit scores are calculated.

Even so, the vast majority of respondents (87%) agree that having a good credit score is important to them. Eighty percent know they can check their credit score for free, and 78% have checked theirs in the last twelve months. Further, 73% plan to take steps to improve their credit score over the next year.

Of those who prioritize a good credit score, almost half (45%) say it's because they want to buy a home. Over a third (37%) revealed that they are currently concerned about their credit score, and of those, 31% say it's because it is preventing them from getting a mortgage.

Major Misconceptions About Credit Reporting: A False Sense of Control

Only 25% of respondents are very knowledgeable about how their credit reports are compiled. The lack of understanding is clear in the following findings:

  • Just over half (52%) believe the credit reporting agencies need their consent to collect personal information
  • 43% percent assume they can prevent the credit reporting agency from collecting and selling their personal information by opting out
  • 31% believe they can control which personal information gets reported to the credit bureaus
  • More than three quarters (78%) think lenders are legally required to report personal information to the credit reporting agencies
  • 44% believe their credit reports from the three credit reporting agencies (Experian, TransUnion, and Equifax) all have the same information about them

In fact, all these beliefs are false. If you supply your personal information to a lender, they are free (but not required) to share that information with the three credit bureaus.

Mike Pearson, founder of Credit Takeoff, elaborates: "Credit card companies have information about you from doing business with you – how much money you charge, how often you pay your bills, how high you keep your balances, etc. – and they pass that information on to the credit bureaus.

"Our survey shows that the majority of Americans (52%) believe they must first give their permission to the credit bureaus to collect this information, which isn't the case. This signals a false sense of control over their data and personal information that simply doesn't exist."

It's also false that each of the three credit reporting agencies have the same information about you. Lenders choose what and to whom they report, so they may or may not report some or all your information to all three bureaus. Each credit reporting agency produces their own report, so your three reports might not contain all the same information. Therefore, it's important to obtain a copy of each and review it on a regular basis. Join MoneyTips to see your three credit reports today.

The Majority Know They Are Entitled to a Free Credit Report, but 19% Have Never Obtained One

Almost all respondents (96%) know they have a legal right to dispute inaccurate information on their credit report, and 82% know they are legally entitled to a free copy of their credit reports every year. This is great news. You can see your credit score and read your credit report for free by joining MoneyTips.

The problem is that 19% have never obtained a copy of their report, and 18% admit it's been at least two years since they last obtained one. This means they forfeit the opportunity to identify and dispute errors on their report that could negatively impact their credit score. Make sure you review your reports regularly and dispute any inaccuracies.

Errors and unfamiliar accounts on your credit report may be signs of identity theft. Let MoneyTips protect your credit and your identity with a free trial.


Photo ©iStockphoto.com/fizkes

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