Myth and fact: What you need to know about credit scores

Smart solutions for busy parents
November 17, 2016
Five ways to get real and consistent savings at the pump
November 17, 2016

Myth and fact: What you need to know about credit scores

For all of the discussion around the importance of credit scores, it’s hard to know what’s true, what’s fiction, and what lies in between.
While there are misperceptions and misunderstandings still lingering in the marketplace, the good news is that overall knowledge about credit scoring is improving. A recent survey by the Consumer Federation of America (CFA) and VantageScore Solutions, one of the two primary companies that generate credit scores, shows that consumers know they have more than one credit score, have a better understanding about the factors that affect credit scores, and have increased familiarity with how different kinds of companies and entities use credit scores. Consumers also have a good handle on some recent additions to federal laws regarding when lenders are required to inform borrowers about their credit scores.
“Increases in consumer knowledge probably reflect, in part, the increased public attention given to credit scores because of the new protections,” says Stephen Brobeck, executive director, CFA. “The improvements may also be related to increased efforts of financial educators, including our own educational website,, to inform consumers about credit reports and scores.”
However, despite the positive developments, there’s room for improvement according to the CFA-VantageScore Solutions survey.
Myth: Low credit scores don’t greatly affect how much you pay over the life of the loan.
Fact: Low scores can be costly. Only 29 percent of survey respondents were aware that on a $20,000, 60-month auto loan, a borrower with a low credit score is likely to pay at least $5,000 more than a borrower with a high credit score.
Myth: Age and marital status are factors used in calculating credit scores.
Fact: Over 50 percent of survey respondents incorrectly believed their age and marital status were factors used to calculate their credit scores. The only factors credit score models use are related to your use of credit, especially whether you make payments on time.
Myth: Multiple inquiries when applying for a consumer or mortgage loan will have a negative effect on your score.
Fact: If multiple inquiries occur during a one-to two-week window, generally they will not lower your credit scores. Only 9 percent of respondents were aware of this, and 34 percent incorrectly believed that each inquiry will lower your score.
Understanding credit scoring can be complex, but it’s in your best interest to get the facts straight. With a clear view of what’s true and false, it’s easier to set the course for a sound financial future. For more information about the myths and facts of credit, visit,  and These websites are free, do not display any advertising and do not collect any personal data. Both the online quiz and a corresponding brochure are also available in Spanish at

Like this article? Tell us what you think!

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Follow this blog

Get a weekly email of all new posts.

%d bloggers like this: