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10 More things you didn’t know about credit scores, credit reporting, and debt in America
Your credit score impacts so much in your life these days, from rent and homeownership to credit card approvals, interest rates on student and auto loans to even employment. But too often, we’re still in the dark when it comes to credit scores, credit reporting, and general financial knowledge about debt management.
As the nation’s leader in credit repair solutions, Nationwide Credit Clearing is committed to help educate you about these important topics. This is part two of our ongoing series, 50 things you didn’t know about credit score, credit reporting, and debt. Look for part one here, and contact us if you have any questions or credit issues at all!
1. Which company earns the title as the most popular credit card in the rest of the world? That honor belongs to both Mastercard, which has 551 million cards issued throughout the world as well as 180 million cards here in the United States. However, Visa wins top-dog honors on home soil, with 278 million cards floating around the U.S., as well as 522 in the rest of the world.
2. It’s no surprise that people often turn to their credit cards to pay bills and living expenses once they are unemployed, In fact, 86 percent of low and middle-income households who have a working member that is now unemployed turn to credit cards to fill the gaps monthly.
3. Likewise, almost 50 percent of low and middle-income households now are carrying credit card debt that comes from out of pocket payments they have to make on medical bills and expenses.
4. It’s interesting to look at a map and compute the average credit score for each state (OK, I don’t get out much!). In fact, the states with the lowest average credit scores are in the south and southwest, including New Mexico, Texas, Oklahoma, Arkansas, Louisiana, Mississippi, Tennessee, Georgia, Alabama, South Carolina, Nevada, and Florida. In those states, an alarming 40 percent of the population have subprime credit scores!
5. However, the states with the highest average credit scores are found in the north and midwest. Minnesota and North Dakota are the states with the highest average credit scores, with 707 and 700 average FICOs, respectively.
6. Aside from the state you live in, there are some other puzzling correlations between the heights of your credit score and your seemingly unrelated behaviors. For example, one study found a direct correlation between credit scores and which email provider the participants used! They found that Comcast email user (692 average) and Gmail, (682) have above average scores, but MSN (669), Aol (668) and Yahoo! (652) email users have below average scores.
7. But more common-sense correlations also apply. For instance, there are significant differences in credit scores based on age. Baby Boomers and the Silent Generation (68-85 years old) have average scores of 700 and up, while Gen Xers average a 655 score, Millennials average a 634 score, and Gen Z is lagging with a 631 average Vantage Score.
8. One correlation that we could have easily predicted is that between scores and homeownership, In fact, a Federal Reserve study found that the average credit score among homebuyers and homeowners is 728 – significantly higher than the national average. Additionally, they found that only 6.8% of homebuyers or homeowners had scores below 620 in the study.
9. We hear about our credit scores impacting home ownership, credit cards, interest rates on other loans, renting, and even employment. But did you know that your credit score can make a big difference on…your dating life? It’s true! According to a 2016 Bankrate survey, almost 4 in 10 U.S. adults say that they’d rather date someone with a good or excellent credit score, but they’d be wary of dating a sup-prime suitor. In fact, 43% of women and 32% of men said that a person’s credit would have an impact on if they dated them.
10. Americans are still pretty mixed up, confused, and turned around when it comes to basic knowledge of credit scores and credit reporting. In fact, studies have shown that of an average sample Americans, 47% didn’t know that credit scores are used by non-creditors like electric utilities and home insurers, 68% didn’t know that cell phone companies use credit scores, and 32% had no idea that landlords could check their credit!
Do you have questions about your credit or looking to improve your score? Contact Nationwide Credit Clearing for a FREE credit report and consultation at (773) 862-7700 or mynationwidecredit.com!
Are Americans illiterate when it comes to credit, credit scoring, and finances?
And if so, how much is it costing us?
Let’s start with that second question, which is easy to answer.
According to Marketwatch, the lack of financial literacy by the average American has cost us a collective $200 billion over the last 20 years! That’s the estimated cost of paying higher interest rates, late fees, not saving for retirement, and the impact of bad decisions caused by living paycheck-to-paycheck.
That comes to $20 billion each year from our lack of financial knowledge – including illiteracy when it comes to credit!
Likewise, The National Financial Educators Council just released a survey that found the average respondent lost $9,724 each year due to their credit and money illiteracy! That backs up the findings of another national study that found that with a mere 20-point increase to our average national credit score, each adult in the U.S. would save almost $5,000 each year!
Now, let’s try to answer the first question we posed, are we just as financial illiterate when it comes to credit scores – or credit illiterate?
On first glance, we might not think so. In fact, the average FICO score reached 700 for the first time ever in 2017, which is a very good score.
But there’s a lot more to the story.
Only 58 percent of Americans have a credit score above that golden 700 number.
And consider that 60 percent of American adults haven’t checked their credit report in the last 12 months, and 66 percent haven’t checked their credit score. That’s about 2/3 of all Americans that don’t even know what’s going on with their credit!
Only 32 percent have received a copy of their free credit report over the last year, and nearly one-in-five Americans haven’t pulled their credit in the last three years!
What’s even scarier is that about 1/3 of all American adults surveyed said that they really didn’t see any reason to pull their credit report or check their score.
Additionally, 56 percent of respondents confessed that they had no idea their credit score was the most important factor when applying for new debt like a mortgage, car loan, or credit card.
And while our national average may be healthy, there’s a wide discrepancy between credit score haves and have-nots.
According to Experian, almost 1/3 of all Americans (30%) have a credit score lower than 601 – which is considered sub-prime. VantageScore also estimates that of the 220 million U.S. adults, 68 million of them have poor or bad scores.
But this isn’t just a snapshot of the good and bad when it comes to credit because we have to factor in those who are credit invisible, too.
Studies have found that about 26 million U.S. adults are credit invisible. While this means that they don’t even have enough of a credit history to garner a score, it’s effectively the same thing as having terrible credit.
Many people are also denied credit even though they want more of it. A reported 67 percent of people who applied for new credit cards in 2015 were denied, and one out of three were approved but for a lower available balance than they’d requested!
Younger adults are really scoring an F when it comes to credit score literacy.
An alarming 68 percent of Americans make at least one significant and costly financial mistake before they even hit the age of 30! These mistakes often cost them dearly as they’re trying to start down the right financial path, and credit score blemishes make take seven to ten years to fall of their reports.
But that doesn’t stop young people from getting credit, as 50 percent of respondents said that they received their first credit score by the age of 21, even though 72 percent had no financial education at all before going to college!
Millennials and Gen Xers are also taking out more debt than ever thanks to student loans, not credit cards. In fact, student loan balances are at an all-time high, with the average student loan balance at $23,186. Our national student loan balance is now $875 billion – higher even than credit cards – and increasing at a rate of $2,853.88 every second!
But it’s not just younger people that are fumbling when it comes to debt, especially credit cards. Seventy-seven percent of us have a credit card, and the average U.S. adult with credit card debt owes $16,048. With a sizable average interest rate of 13.66%, that means $183 is accumulated in interest every month.
One in three carry a balance month-to-month without paying it off, often paying just the minimum payment.
Even worse, nearly 16 percent of people with a credit card balance don’t even know their card’s APR, or true interest rate, and that’s even more prevalent (21 percent) among lower-income households.
So if we’re so credit illiterate, what’s the solution?
It seems the simple fix is just to start teaching financial education in schools. In fact, 99% of adults surveyed thought it would be a good idea to teach about credit, debt, interest rates, personal finance, and credit in high schools or even earlier.
However, the plan runs into a snag when you consider that only 1 in 5 teachers feels qualified to teach a class on financial or credit education!
Until they start making the grade, the better solution is to contact Nationwide Credit Clearing for a free copy of your credit report, a complimentary consultation, and the #1 credit repair firm in the country!