Barriers to Credit Score Awareness: Why Do Many Americans Not Know Their Credit Score?

Credit is something that most Americans encounter in their everyday lives. Whether it’s getting a loan or opening a credit card, people constantly use financial services that involve borrowing and lending. In these processes, one aspect is often underestimated by the consumer: the credit score. 

This number depends on a range of factors stemming from the financial records of an individual. Banks, employers, and even landlords may check this information to make sure they cooperate with a responsible and trustworthy person. Luckily, anyone can check their scores to make sure they maintain a healthy financial profile or to evaluate their chances of securing a deal.

One can assume that most people do that regularly to monitor their situation. However, a recent study surveying financial service consumers in America found that 15.3% never check their scores. What can be the reasons behind this statistic? Let’s analyze the main barriers that stand between the average consumer and financial awareness. 

Complex Credit Score Systems

The credit landscape in the USA is rather complicated, with several bureaus offering proprietary scoring models. Depending on which system your lender chooses, it may get different results due to the way these scoring models work.

For instance, two leading scoring systems are FICO and VantageScore. Although they are similar in the format of the scale they use (i.e., numbers from 300 to 850, with a higher result being better) and the main scoring factors, there are still important differences. The two systems set different minimum scoring criteria that determine the eligibility for a credit score and different point values that they assign to scoring factors and ratings.

This makes it difficult for consumers to pick which score to trust and leads to confusion in interpreting the results. In addition, not all companies disclose which scoring model they use in their evaluation process, causing additional stress on the consumer. 

The Myths Surrounding Credit Scores

Considering the complexity of the financial systems, it’s no wonder that there are many myths about the credit score. Some of them prevent people from trying to access this vital information. The most common misconceptions that influence credit score monitoring are the following:

  • Checking Your Report Hurts the Score

One of the most persistent myths is that self-checking your credit report damages your score. This is a misunderstanding. 

There are two kinds of inquiries into one’s financial history: soft and hard inquiries. Checking your own credit score results in a soft inquiry, which does not affect your score. This contrasts with hard inquiries, which occur when lenders check your score and can slightly lower it. 

  • You Only Have One Credit Score

A common misconception is that individuals have a single credit score. In fact, you have multiple credit scores. This comes down to the existence of the different scoring models, which we’ve discussed above.

Additionally, the three major credit bureaus (Equifax, Experian, and TransUnion) may report slightly different information, leading to varying scores. Understanding the existence of multiple scores can provide a more comprehensive view of your credit health.

  • If You Pay Off Negative Records, They Are Removed from Your Report

Many assume that once they pay off debts in collections or settle other negative records, these items will be removed from their credit report. However, it doesn’t work like that. Some negative marks can stay on your report for up to 10 years, even after being paid off. 

However, their impact decreases over time, especially with good credit habits. Consistent responsible financial behavior is essential for improving your credit score over time. Regular checks help you understand whether their influence is still noticeable. 

Economic Inequality

When it comes to financial awareness, the economic class has a great impact on how people handle and monitor their money. In most cases, those in the lower socioeconomic classes have limited access to financial education and helpful resources. 

Plus, they may not have the possibility to focus on finance management, facing more pressing concerns such as meeting basic needs. This makes it significantly harder to monitor and manage their credit scores.

Accessibility Issues

While there are numerous online platforms and apps that allow you to check your financial history, many of which are free of charge, some people have a harder time accessing such services. This serious barrier is caused largely by the digital divide.

For instance, the elderly or people living in rural areas may have limited access to technology or the Internet, and not everybody can request a report from their bank. Some people can find these digital resources complicated, and the issue of accessibility for disabled individuals is also still present.

Conclusion: How Can We Overcome the Barriers?

To sum up, the main reason for poor credit score awareness is limited access to information about scoring systems, reliable educational resources, and a low level of financial literacy. The economic inequality and accessibility issues also influence the level of awareness and the frequency of credit score checks. 

However, these barriers can be overcome. For instance, spreading truthful facts about credit score monitoring and improving the level of education about finances can help people take control of their financial records.

Interesting Related Article: “Dos and Don’ts of Building and Maintaining a Good Credit Score