July 31, 2003 -- Using a credit card is like second nature to most of us Americans. Neither is it much of a challenge to arrange a car loan. But while we surely know the value of a dollar, we don't know the value of knowledge about our credit history.
As of last March, Americans had racked up $1.7 trillion in consumer credit, according to the Federal Reserve. That's the debt we've incurred on "plastic" as well as bank, auto, and other loans.
Now, the Consumer Federation of America, or CFA, has commissioned a study to find out what we know about our credit reports and our credit scores — and it's astonishingly little.
But at least we admit it. Half of those surveyed said their knowledge of credit reports was only fair or poor. Sixty percent said their knowledge of their credit score (the measure of your credit-worthiness) was fair or poor.
The percentage is higher among low and moderate income groups, who tend pay the highest price for credit, and who, experts say, are most vulnerable to credit record mistakes.
The July telephone survey of 1,020 adults also found only one in four know their credit score. Only 43 percent said they had obtained a copy of their credit report in the past two years.
Why is this important? Because uncorrected errors on your credit reports can cost you hundreds or thousands of dollars in higher interest rates demanded by lenders.
And experts say that could amount to hundreds of thousands of dollars over the life of a 30-year mortgage. Uncorrected errors can also result in being denied credit or other services.
The CFA ordered up the study in preparation for a recent Senate Banking Committee hearing on consumer feelings about credit. Provisions of the Fair Credit Reporting Act expire early next year and lawmakers want to know how to make it work better for consumers.
The study found large majorities would like better credit protections, including:
Improved access to credit reports
Better protection from identity theft
Barring insurance companies from using credit reports to make coverage decisions, and
The ability to sue lenders who knowingly provide credit bureaus with incorrect and damaging information.