Checking credit scores lead to positive credit behavior

To maintain a respectable credit score, consumers must first recognize any negative tendencies, such as consistently late payments, which may impede their ability to improve their number. An earlier survey found more than 50% of Americans hadn’t checked their score in 2011.

Fast-forward to 2020 and the tides have changed. According to a February USA Today report, more than 50% of U.S. consumers review their credit scores at least once a month. Studies have found this has led to more positive credit behavior and responsible borrowing habits.

Credit reports are more accessible

Generally, having access to credit reports gives consumers a better understanding of their creditworthiness. Fortunately, today reports are more accessible than they used to be. Under federal law, consumers are allowed to have one free credit report per year from each of the major credit bureaus.

During the midst of the COVID-19 pandemic, consumers can now temporarily access reports once a week. Knowing what’s on a credit report is helpful because it shows where a consumer stands and they can also examine it to see if any credit errors exist that need to be fixed.

Positive impact of tracking credit health

The USA Today report noted about 40% of consumers turn to multiple sources to review their credit. Other findings included:

• 71% of consumers who check their scores once a month feel more control over their day-to-day finances.
• 34% of subprime consumers who monitored their credit for a period of one year boosted their score to near-prime or to an above risk credit tier.

This seems to indicate having free access to credit reports has had an overall positive impact on a person’s credit health.

Value of understanding credit concepts

In July 2020, CNBC reported on a separate credit survey. This study, conducted in June 2020, found lower-income households had the least understanding of credit scores, but a significant percentage of all consumers, regardless of income, couldn’t answer basic credit concepts. Here are some of those concepts it’s important for consumers to know.

• Lower credit scores cost car buyers thousands of additional dollars due to rates associated with subprime auto loans.
• Credit card companies often charge consumers for services they can do for free themselves, such as fixing credit report errors.
• Utility companies can check a person’s credit score.
• Credit scores measure a consumer’s risk of not paying money they owe.
• Age is not a factor when calculating a credit score, it’s the use of credit that matters in a person’s payment history, including amounts owed, rate of new credit applications, length of credit history, and the variety of credit products a person has.

Understanding basic credit concepts can go a long way towards improving one’s credit standing because mistakes can be avoided. It’s important not to make assumptions when it comes to credit.

Did you know you don’t have to rely on a traditional score to gain access to credit? An alternative credit score is another great option to demonstrate to lenders your creditworthiness. Want to learn more about how to earn a free alternative credit score? Contact PRBC today for more information.