Few people actually know what a credit score represents. For example, less than one-third of Americans understand that credit scores indicate risk of not repaying a loan and not knowledge of, or attitude toward, consumer credit. That is what has come out, among other things, from a new survey commissioned by the Consumer Federation of America (CFA) and Washington Mutual Bank, the guys you call WaMu.   Moreover, the survey reflects the fact that most Americans fail to understand that one’s credit score shows only how they use credit and does not include factors such as income and age. Those that have obtained their scores are generally the most knowledgeable, says the survey.   But if you have clients who have low credit scores, what can you advise them about raising such scores? Here are some ways they can do it:  

  • Consistently pay their bills on time every month


  • Not maxing out or even coming close to maxing out


  • Paying off debt rather than just moving it around, as well as not opening many new accounts too quickly


  • Regularly checking their credit reports, which, as you know, can be obtained for free, to make sure they are error-free.

  Consumers should know that credit scores would rise if they paid off a large credit card balance and would fall if one made a monthly credit card payment more than 30 days late   Moreover, both CFA and WaMu believe that all consumers should know certain important facts about credit scores:  

  • They reflect only one’s past credit history, not personal characteristics such as age, gender, or level of income.


  • Low scores could not only cost individual consumers thousands of dollars a year in additional finance charges but can also deny access to credit, insurance, telephone service, a rental unit, and even a job.


  • Consumers with credit scores below 600 are almost always charged relatively high “subprime” loan rates while those with scores above 700 are often charged relatively low “prime” rates, and those with scores above 760 are generally charged the lowest rates.

  For this report, WaMu, using data supplied by Argus Information and Advisory Services, estimated that U.S. consumers could reduce card finance charges by $105 annually if they raised their score by 30 points. In fact, if all consumers raised their scores by 30 points, total annual consumer savings would be an estimated $28 billion.   As you already know. Federal law requires that three main credit bureaus—Experian, Equifax, and TransUnion, are to make available to consumers, upon request, and at no charge, one credit report per year. Go to www.annualcreditreport.com.

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