Consumers are largely in the dark about credit basics, including how to build and maintain good credit, according to U.S. News & World Report, the global authority in rankings and consumer advice.
In its most recent survey, U.S. News found that more than a third (34 percent) of respondents don’t realize how a bad credit score can impact their life. An additional 20 percent of respondents are unsure how to check their credit report, and 14 percent say that they don’t know how often they should be checking it.
When it comes to how they are charged for borrowing cash, Americans have more to learn. Thirty-one percent of respondents don’t know what APR stands for. What’s more, they don’t always understand the circumstances under which their APR can change: More than 48 percent don’t know whether their APR can change at all, and only 23 percent realize the APR can change on a credit card with a variable APR.
“The impact of bad credit can be devastating: It can lead to higher interest rates, having to pay more for insurance and being denied housing,” said Beverly Harzog, best-selling author, credit card expert and consumer finance analyst at U.S. News. “It’s crucial for consumers to become more credit savvy now by checking their credit reports and building a great credit history to protect their financial futures.”
Additional findings from the U.S. News & World Report Financial Literacy Survey:
- When asked what actions are necessary to improve a credit score, half of consumers know that on-time payments can boost your score. Fewer consumers know that using 30 percent or less of your credit line and having a mix of credit types could improve your score.
- Less than 40 percent of consumers know that you don’t need to carry a card balance month to month to improve your credit score. About a quarter of respondents mistakenly believe increasing your income improves your score.
- Only 41 percent of consumers know that interest is applied to a revolving balance.
- Twenty-six percent know that closing an old account can have a negative impact.
- Twenty-nine percent want to learn more about how to save this Financial Literacy Month. In addition, respondents are interested in learning about budgets (26 percent), their credit score (24 percent) and debt (23 percent).
U.S. News conducted the Financial Literacy Survey through Google Survey. From March 21-23, 2019 the survey asked 10 questions related to financial literacy and sampled 1,502 people in the general American population who visit desktop and mobile sites where Google conducts surveys.